ONGC expects to complete HPCL stake buy by December

ONGC hopes to complete the acquisition of a 51.11 per cent in Hindustan Petroleum Corporation Ltd (HPCL) by December-end.

Speaking to journalists at a press conference after the company's 24th AGM, Chairman and Managing Director DK Sarraf said: “We will definitely complete the HPCL stake buy within the current calender year.”

He added that both the Centre’s Department of Divestment and ONGC have engaged fund managers and transaction advisors to complete the deal as early as possible.

He also said that ONGC is not willing to pay a premium on the current market price for the HPCL stake buy.

“We have several options to fund the acquisition. On a standalone basis we are debt free, so we can borrow from the market. Also, we have investments which can be sold,” he said.

The HPCL deal will not result in a “reduction in our upstream capital expenditure as we plan to sell liquid assets”, he added

Sarraf was responding to shareholder worries that capital expenditure may be hit if there is a substantial fund outgo for the acquisition. “But that decision, if needed, will be taken when the time comes,” he added.

He further said the acquisition of HPCL will lead to reduced volatility in share prices as it is a downstream company. According to him, the acquisition will increase profitability as it can protect the upstream major from crude oil price fluctuations.

As of June-end, ONGC held a 13.77 per cent stake in Indian Oil and 4.87 per cent in GAIL.

Sarraf also said the company will start production from Nagayalanka, Periyakudi and Bantumillu South fields during the current financial year.

ONGC is also in favour of merging its existing downstream subsidiary, Mangalore Refinery and Petrochemicals Ltd, with HPCL. Sarraf said: “We are in favour of merging HPCL and MRPL for better integration of downstream operations.”

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