ONGC Asks HPCL To Rectify Promoter Classification

State-owned Oil and Natural Gas Corporation Ltd. has asked refiner Hindustan Petroleum Corporation Ltd. to rectify its exchange filings to reflect the true promoter after government’s exit, said people with direct knowledge of the development.

ONGC had in January this year bought the government’s entire 51.11 percent stake in HPCL for Rs 36,915 crore. Subsequently, HPCL is now a subsidiary of ONGC.

However, HPCL’s filing to the stock exchange, the latest being on July 12, still lists ‘President of India’ as the promoter even with ‘zero’ percent shareholding. ONGC, on the other hand, is listed under ‘Public Shareholder.’

Sources said ONGC has written to HPCL management asking it to rectify the filings to reflect the true promoter of the company.

Since the ONGC takeover in January, HPCL has made two stock exchange filings about the shareholding pattern of the company--the first on April 20 and then on July 12. In both, ONGC is shown as the public shareholder and President of India is listed as the promoter.

According to ONGC, the HPCL management is bound to take corrective action to reflect the true picture, sources added.

According to the market regulator Securities and Exchange Board of India’s rules, the entity that owns the controlling stake should be listed as promoter even if they were not the original promoters of the company.

When Indian Oil Corporation Ltd. had bought the government’s stake in fuel retailer IBP Co. Ltd., it was listed as the latter’s promoter in every instance after the deal. The same was the case when IOC acquired a majority stake in Chennai Petroleum Corp. Ltd.

While HPCL officials refused to comment on the issue, sources said the issue at hand may be owing to the desire of HPCL management not to be seen as part of the ONGC group.

HPCL Chairman and Managing Director MK Surana has retained the title despite corporate governance structure require a group having just one chairman and subsidiaries being run by managing directors and chief executive officers.

ONGC’s overseas subsidiary, ONGC Videsh Ltd. is headed by a managing director and CEO. Also its refinery subsidiary, Mangalore Refinery and Petrochemicals Ltd., which is listed on BSE, too is led by an MD and CEO. ONGC Chairman is the head of boards of both the companies.

Since acquiring a majority stake in HPCL, ONGC has only been able to appoint one director to that firm’s board--its Director (Finance) Subhash Kumar. He has replaced Sushma Taishete Rath, Joint Secretary in Ministry of Petroleum and Natural Gas.

Prior to this, HPCL had two government nominee directors--Rath and Sandeep Poundrik, Joint Secretary (Refineries) of the oil ministry. After the appointment of Kumar, there remains only one government nominee director in HPCL.