Buzzing stocks: ONGC-HPCL merger gets Cabinet approval

Creating the maiden amalgamated oil behemoth, the Cabinet gave its in-principle approval to the government’s stake-sale proposal, selling the entire 51.11 per cent shares of the government in Hindustan Petroleum Corp Limited (HPCL) to Oil and Natural Gas Corporation (ONGC). The merged oil giant is expected to have a combined market value of USD 42 billion, buckled up to compete the global and foreign majors in the sector.    

Following the merger, ONGC is following the holding company route, not merging with HPCL post the stake sale. HPCL is continuing to operate as a listed subsidiary of ONGC, which will become an integrated entity. With HPCL as its subsidiary, ONGC has become the third largest oil refiner in India, after Indian Oil Corporation and Reliance Industries.  

Further, as a part of the complete transaction, ONGC will shift its refining subsidiary MRPL under HPCL’s ambit. ONGC has 71.63 per cent stake in MRPL, whereas, HPCL has 16.96 per cent of MRPL’s stake.   

In accordance with India’s erstwhile third largest refiner-retailer, HPCL’s present market value, the government is expected to mop out nearly Rs 28,000 crore from the deal, aiding the government to meet about 38 per cent of its Rs 72,500 crore disinvestment target for the fiscal year 2018, without even losing control over HPCL.  

The deal is likely to be completed within the current fiscal year, under the surveillance of the finance minister Arun Jaitely, the petroleum minister Dharmendra Pradhan and the road and transport minister Nitin Gadkari.

In Thursday’s early trade, ONGC became the most active stock in terms of volume with 0.48 crore shares changing hands on NSE. However, since the beginning of the calendar year 2017, ONGC shares have come down by 15 per cent, while HPCL has recorded a 28 per cent hike.

On July 20, ONGC had hit an intraday high at Rs 167.40, up by 2.69 per cent on the bourses at 0935 hrs IST. On the contrary, HPCL was trading low, down by 3.04 per cent at Rs 372.20 at its intraday lowest at 1140 hrs IST.