To Buy HPCL Shares ONGC In Need Of Rs 36,915 Crore
Oil and Natural Gas Corporation (ONGC) will need Rs 36,915 Crore to buy government stake in Hindustan Petroleum Corporation (HPCL). The money will be arranged by the company by selling off its stake in Indian Oil and GAIL along with its cash reserve.
The government has 51.11% stake in HPCL. ONGC has to pay the amount until January end to buy it. From this deal, ONGC will turn into the 3rd largest refinery company in the country. First two places are acquired Reliance Industries and Indian Oil. The company will also get control of about one-fourth of the petrol pumps in the country.
ONGC Chairman and Managing Director Shashi Shankar said, “We have cash worth Rs 12,000–13,000 Crore. We also have the permission to take loans from banks and sell our stake in Indian Oil and GAIL.”
Shankar said that for the funding of the deal, the company’s Priority Cash Reserve, Indian Oil, and GAIL sell stake will be used. They said that it may be that the company doesn’t want to sell its shares immediately in Indian Oil and GAIL. They said, “We are not in haste, we want good value.”Indian Oil has 13.77% ONGC and 4.86% in GAIL. On the current market price, ONGC can get around Rs 30,000 Crore after selling a stake in these two companies.
ONGC has a sanctioned loan of about Rs 50,000 Crore on better terms. However, the amount loan the company will take from it and which banks it will take depends on its needs and the final conditions. Shankar said that the company will borrow for short term in Foreign and Domestic Currency. It will be later paid by the amount of the company’s stake sale in Indian Oil and GAIL.
HPCL’s shares will buy ONGC for a price of Rs 473.97 per share. It will be about 14% premium from the closing price of HPCL’s stock at 416.55 on Friday. Riteish Gupta, an analyst of Ambit Capital, said, “The concerns of ONGC shareholders have come to an end.” Earlier there was speculation that ONGC can be strengthened on giving a heavy premium or bringing an open offer for minority shareholders.
Talking about the acquirement, the finance ministry stated that ONGC will have its presence over the whole value chain and come out as the country’s first integrated oil major. Post completion of the deal, HPCL will still remain as central public sector enterprises.