The Hindu Business Line : ONGC set to acquire HPCL stake in Mangalore Refinery

MOVING a step closer to merger, Oil and Natural Gas Corporation (ONGC) is set to buy out Hindustan Petroleum Corporation Ltd's (HPCL) stake in Mangalore Refinery and Petrochemicals Ltd (MRPL) for Rs 1,121.75 crore.

"ONGC board on Wednesday moved a proposal to buy out HPCL's 16.97 per cent stake in MRPL at Rs 37.75 per share," company sources said.

The proposal to buy out HPCL's stake has been forwarded to the Petroleum Ministry for formal approval. In a meeting convened by the Ministry on September 18, the formula to determine sale price of HPCL's equity was determined. It remains to be seen if Cabinet approval is required or not, a senior ONGC official said.

Post approval, ONGC stake in MRPL will climb to 87.95 per cent. For the time being MRPL will continue to be a subsidiary. "The issue of merger was discussed at yesterday's meeting. It was, however, put off since there are management issues in regard to MRPL that require to be sorted out prior to the merger," a senior official said.

MRPL is yet to be notified as a public sector undertaking. Further, the integration of two organisations in terms of the management cadre remains to be sorted out. "We have to sort this out before the merger is done," the official said.

The merger would allow ONGC to take on its books MRPL's losses and hence reduce its tax liability. In a sense, it would be getting the refinery for free in two years' time from the point of taking a controlling stake in MRPL earlier this year.

Sometime back, ONGC bought out Aditya Birla group's 37.4 per cent stake in the beleaguered MRPL for Rs 59.43 crore at Rs 2 per share. It then infused Rs 600 crore capital as part of a debt restructuring package (DRP) approved by the financial institutions.

The DRP resulted in ONGC netting 51.25 per cent stake in MRPL with joint venture partner HPCL's stake coming down from 37.4 to 16.97 per cent.

Later in June, ONGC bought out financial institutions and banks' stake in MRPL (20.9 per cent stake) for roughly Rs 370 crore.

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