Is ONGC finally being recognised as promoter of HPCL?

P. Manoj MUMBAI | Updated on June 25, 2019

ONGC has a participating interest in the Mozambique Rovuma Area-1 Offshore Project through ONGC Videsh   -  Amit Dave

A 15-month-long wait for India’s biggest oil and gas explorer and producer, Oil and Natural Gas Corporation Ltd (ONGC), to be recognised as the promoter of state-run oil refiner Hindustan Petroleum Corporation Ltd (HPCL), which it acquired in January 2018 through a PSU to PSU deal, took a small tentative step forward last week.

On June 17, Shashi Shanker, Chairman and Managing Director of ONGC, sat on the interview panel of the government’s head-hunter, the Public Enterprises Selection Board (PESB), to select a new finance director at HPCL, multiple government sources told BusinessLine.

M. K. Surana, the Chairman and Managing Director of HPCL, was conspicuous by his absence from the interview panel, which is seen as an indication that HPCL has at last recognised ONGC, a maharatna PSU, as its promoter.

To select a director of a company in which the government or its controlled company has more than 50 per cent stake, a PESB panel holds interviews from among short-listed candidates. The panel is assisted by the Secretary of the administrative ministry concerned and the Chairman of the company.

In the case of subsidiaries, the full-time Chairman of the holding company is invited to assist the PESB in the selection of a director, according to guidelines issued by the Department of Personnel.

M. K. Surana has retained the title of Chairman and Managing Director of HPCL - a navratna PSU, which has all the credentials to qualify as a maharatna PSU - despite a corporate governance structure requiring a group to have just one chairman and subsidiaries to be run by managing directors and CEOs. This has baffled corporate watchers, who reckon that the government did not envisage such a scenario when it sold its stake in HPCL to ONGC, to boost the disinvestment mop-up.

ONGC's overseas subsidiary, ONGC Videsh Ltd, is headed by a Managing Director and CEO. Its listed refinery subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), is also led by a Managing Director and CEO. The ONGC Chairman is the Chairman of the boards of both the companies.

The PESB panel picked HPCL’s executive director R Kesavan for the role of finance director from a short-list of nine candidates that included five from HPCL.

Flowing from the presence of ONGC’s Shashi Shanker on the interview panel on June 17 that picked Kesavan, the next logical step for HPCL is to notify the stock exchange, listing ONGC as its promoter rather then just a public shareholder, as it has been doing since the government sold its 51.11 per cent stake in HPCL to ONGC for Rs 36,915 crore.

But, this will only happen when HPCL submits its quarterly shareholding pattern to the stock exchange some time in July this year.

Recognising ONGC as promoter of HPCL would also entail a rejig of the board of HPCL, with the Chairman and Managing Director of ONGC chairing the board meetings of HPCL, and the CMD of HPCL being re-designated as its managing director and CEO.

This will prove beyond doubt whether the presence of Shashi Shanker on the PESB interview panel on June 17 was a mere cosmetic exercise or a steady step forward for ONGC in its pursuit to be recognised as HPCL promoter.

Published on June 25, 2019

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