ONGC needs to pay Rs 36,915 crore for the government’s 51.11% stake in HPCL by January-end. The deal would make state-run ONGC the third largest refiner in India.
NEW DELHI: Oil & Natural Gas Corporation will use a mix of debt, cash reserves and proceeds from a planned sale of stakes in IndianOil and GAIL to fund its acquisition of Hindustan Petroleum Corporation, the chairman of India’s largest oil explorer said.
ONGC needs to pay Rs 36,915 crore for the government’s 51.11% stake in HPCL by January-end. The deal would make state-run ONGC the third largest refiner in India, after Indian Oil and Reliance Industries, and give it control over nearly a fourth of filling stations.
“We have cash reserve of about Rs 12,000-13,000 crore, a blanket approval for loans from banks, and the government approval to sell our stakes in IndianOil and GAIL. We still have 4-5 days and we will figure out the best combination,” Shashi Shan ker told ET.
For funding the deal, the company’s order of priority is cash reserve, sale of stakes in IndianOil and GAIL, followed by debt, Shanker said.
ONGC may or may not sell stakes in IndianOil and GAIL immediately, he said. “We are not in a hurry. We would look for a fair price,” he said.
ADVERTISEMENT
ONGC’s 13.77% stake in IndianOil and 4.86% in GAIL can fetch about Rs 30,000 crore at current market prices. ONGC has about Rs 50,000 crore of sanctioned loans at favourable terms, but how much it would draw and from which banks will depend on its own need and the final commercial terms, Shanker said.
It could be a mix of domestic and foreign currency borrowings for short term, which would eventually get repaid by proceeds from sale of ONGC’s stake in IOC and GAIL, he said. ONGC will buy HPCL’s shares at Rs 473.97 apiece, a nearly 14% premium to the Friday close of Rs 416.55.
“The worst fears of ONGC shareholders is over,” said Ritesh Gupta, an analyst at Ambit Capital. There was wide speculation that ONGC might be forced to pay a hefty premium or make an open offer to minority shareholders. Minority investors, if they stay invested for long, will also gain greatly since there is immense synergy between the two firms and scope for long-term growth, Shanker said. ONGC has been exempt from making an open offer.
“After integration, ONGC’s top line and bottom line will be less affected by crude price volatility as we would have increased refining and marketing operations,” he said.
