The Hindu Business Line : KRL merger with BPCL awaits Ministry nod

THE formal merger of Kochi Refineries Ltd (KRL) with Bharat Petroleum Corporation Ltd (BPCL) is still awaiting clearance from the Ministry of Company Affairs.

After receiving the Cabinet go-ahead for the merger, BPCL had approached the Company Affairs Ministry for final approval.

As per the Companies Act, while listed public companies in the private sector need to get the merger scheme approved by the High Courts concerned, state-owned companies require the Ministry of Company Affairs' approval.

Sources in the Ministry told Business Line that certain information from the Registrar of Companies (RoC) concerned was awaited. They, however, did not elaborate on the information sought from the RoC, stating that it was technical in nature.

The KRL-BPCL merger proposal had moved a step closer, with the Cabinet in August approving it through the creation of a trust. The merged entity will also have a nominee of the Kerala Government, a condition the State had put for accepting the merger and to which the Finance Ministry had earlier objected.

The boards of the two companies had in January approved a swap ratio of 4:9. Under the merger scheme, the Union Government's holding in BPCL will fall to 54.93 per cent from 66.20 per cent now. The Cabinet had also approved the transfer of BPCL's shares in KRL to a trust, which could be sold at a later stage for financing the Rs 7,400-crore Bina Refinery Project of BPCL and the modernisation of KRL.

The Finance Ministry had opposed the move to transfer the shares to a trust and had, instead, proposed that BPCL should extinguish its shares in KRL, which would have resulted in the Government holding in BPCL coming down to 60.58 per cent. But this was rejected on the grounds that it would have led to more than 50 per cent equity of KRL being eroded. BPCL currently holds a 54.81 per cent stake in KRL, which would, post-merger, be transferred to a trust in the ratio of 1:2.25.

On the appointment of a Kerala Government nominee, the Finance Ministry, the Department of Public Enterprises and the Ministry of Company Affairs had expressed reservations, saying that the State held less than one per cent in the merged company and that did not merit a board representation.

The Union Cabinet had, however, accepted the Petroleum Ministry's argument and approved the appointment. With this, there would be room for only one Central Government nominee on the BPCL board, since under the present guidelines, only two government nominees are allowed. The Finance Ministry had also questioned the swap ratio.

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