The Cabinet on Wednesday gave in-principle nod to the merger of state-owned Oil and Natural Gas Corp (ONGC) and Hindustan Petroleum Corp Ltd (HPCL). As per Wednesday's closing price, a 51.11 per cent stake in HPCL is worth around Rs 30,000 crore. Later, another news report said that ONGC officials are of the view that no premium is required to be paid since HPCL is openly traded in the market and is already fairly valued.
"ONGC has forwarded a proposal to acquire HPCL".
Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals Ltd (MRPL) to bring all the refining assets of ONGC under one unit. ONGC, which has cash reserves of Rs 13,014 crore, also has an option to sell part or all of its 13.77 per cent stake in International Olympic Committee which is worth almost Rs 25,000 crore. The deal will be completed within a year, he said. Clarifying the deal, Saraff added that ONGC is "not talking" about merging HPCL as the brand of the refining and marketing company will continue to remain in place. With government waiving the need for ONGC to make an open offer, analysts peg the size of the deal at around '28,000 crore. "We propose to create an integrated public sector "Oil Major" which will be able to match the performance of worldwide and domestic private sector oil and gas companies", Jaitley said on 1 Feb while presenting the Union Budget.
The BSE Oil & Gas index was trading 66 points up at 13905.17 around 1.15 pm (IST).
The recent flurry of activity to integrate government-owned Oil Marketing Companies (OMCs) with oil and gas exploration companies follows Finance Minister Arun Jaitely's announcement during the 2017-2018 budget speech on the government's plan to create an integrated public sector "Oil Major" rivalling global and domestic private sector oil and gas companies.
Indian Oil is in talks to buy out the government's 66 per cent stake in Oil India which is seen as a part of the Modi government's vision to create integrated oil and gas companies, as announced by Finance Minister Arun Jaitley in his 2017 Budget speech.
"The synergy benefits for the companies would be huge", Sarraf said.
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