ONGC may sell IOC, GAIL stakes to fund HPCL acquisition: CMD

ONGC CMD DK Sarraf

ONGC might sell some of its stake in Indian Oil Corp and gas utility GAIL India to part fund its over Rs 32,000-crore acquisition of refiner Hindustan Petroleum Corporation Limited (HPCL), Chairman DK Sarraf said.
ONGC holds 13.77 per cent stake in India’s biggest refiner IOC, which is priced about Rs 26,600 crore. It has another 4.87 per cent stake in GAIL India Ltd, worth Rs 1,637 crore.
“We have several options to fund the acquisition of government’s 51.11 per cent stake in HPCL. On a standalone basis, we are debt free and so we can borrow...
from the market.
Also, we have certain investments (in other oil companies) which can be sold,” he told reporters.
“We haven’t decided what will be the source of fund (for the acquisition). It can be one of the options or a combination of them. Funding is certainly no difficulty,” he said.
“As a buyer, we would like to have the lowest valuation while the government as a seller would like to get the maximum value. But since HPCL is a listed company with a market float of 49 per cent that is widely spread, there need not be a significant difference between what we need to pay and the market price,” Sarraf said.
The deal, he said, was likely to conclude by December.
He ruled out making an open offer to minority shareholders of HPCL post acquiring government’s 51.11 per cent stake.
“There is no change of management and we have been advised that there is no requirement of an open offer,” he said.
The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted ‘in-principle’ approval to the strategic sale of the government’s existing 51.11 per cent stake in HPCL to ONGC “along with the transfer of management control, which will result in HPCL becoming a subsidiary company of ONGC”.
But since the offer meant a transfer of management control from the government to ONGC, there was apprehension it would trigger SEBI’s takeover code and compel ONGC to make an open offer to acquire an additional 26 per cent stake from minority shareholders, he said.
The terms of sale have been amended to state that “HPCL will continue to be a government company in terms of section 2(45) of the Companies Act, 2013, and will continue to be controlled by the Government of India through ONGC under the administrative control of the Ministry of Petroleum and Natural Gas.”
Listing out rationale for the acquisition, Sarraf said integrated oil companies are the norm world over as they help balance upstream oil and gas production risks with downstream refining and marketing.
Earlier, Shashi Shanker has been appointed CMD of the Maharatna PSU till March 2021. The Appointments Committee of the Cabinet named Shanker, who is currently Director (Technical and Field Services) at ONGC, as CMD till his superannuation, as against an initial one-year term proposed by the Oil Ministry. Shanker will succeed Sarraf.