Government to transfer 51.11% shareholding of HPCL to ONGC

According to certain media reports, 51.11 per cent shareholding of Oil and Natural Gas Corporation (ONGC) is likely to be transferred to HPCL, thereby making it a subsidiary of ONGC. This will also cut short the long process of merger.

The decision is in-line with the government's plan of creating a consolidated public sector oil giant and enabling it to compete with the major private oil and gas companies like Shell and Exxon.

ONGC is an Indian state-owned oil and gas company, operating in oil & gas exploration as well as the production & refining activities. On the other hand, HPCL is engaged in crude refining and marketing of finished petroleum products including ATF, bulk fuel & speciality, LPG and lubes. 

This transfer of stake will combine ONGC's exploration function with refining and distribution capabilities of HPCL. Such a vertical integration will enable control over the high crude oil price risk and also, improve its exploration business. Its distribution segment is expected to benefit as the oil prices drop. Meanwhile, this will also stabilise the company's earnings and benefit the investors by reduced volatility.