More Mergers Like ONGC-HPCL Deal Possible, Says Pradhan
HPCL will continue to be an independent company, says Dharmendra Pradhan
Petroleum Minister Dharmendra Pradhan said there is a possibility of more mergers like the Oil and Natural Gas Corporation's acquisition of the government’s 51.1 percent stake in Hindustan Petroleum Corporation Ltd. as India took the first step to create an oil behemoth to better compete with global rivals.
“All the refineries under ONGC will come under HPCL and it will be an integrated refinery group,” he said at a press conference in New Delhi on Monday. “Why to use jargon like strategic sale or divestment. It’s a vertical integration of companies. After seeing the price volatility, we wanted to create an oil major.”
ONGC will acquire government’s 51.1 percent stake for Rs 36,915 crore, helping it exceed its record divestment target for the first time. Against the Rs 72,500 crore target, the government will mop up more than Rs 91,000 crore. That will help it improve its finances as it had exhausted the fiscal deficit limit in the first eight months of the financial year.
“HPCL will be a corporate governance model. It will continue to be an independent company,” Pradhan said. The government is focussing on the petrochemical sector for increasing employment in India.
“ONGC's subsidiaries like ONGC Petro additions Ltd., ONGC Mangalore Petrochemicals Ltd., and the Bhatinda refinery might merge with HPCL's petrochemical business. This will be an integrated refinery vertical.”
Asked why the share purchase is exempt from the mandatory open offer, Pradhan said that the government had acquired HPCL through a parliamentary act and this was the best model for the deal. The share purchase is exempt from the requirement of open offer, as it is covered by a statutory exemption in the takeover code.