India Said to Plan Completing $4.5 Billion HPCL Sale This Year

  • Government plans to sell 51.1% of HPCL to ONGC by December
  • HPCL sale can meet about 40% of divestment target for 2017-18

The Indian government is planning to sell a stake valued at $4.5 billion in state-refiner Hindustan Petroleum Corp. to the country’s biggest explorer this year as part of its plans to create a state-owned oil giant, according to people with knowledge of the matter.

The government plans to sell its 51.1 percent holding in India’s third-largest refiner to Oil & Natural Gas Corp. and the final model for combining the two state-run companies will be decided in a few months, said the people, who asked not to be identified because the information isn’t public. The oil ministry favors turning HPCL into a unit of ONGC instead of merging the two companies, one of the people said. Finance Ministry spokesman D.S. Malik, ONGC and HPCL spokesmen declined to comment.

India said in February it plans to create an oil giant through consolidation and mergers that could compare with international companies and withstand volatility in oil prices. The stake sale will also help the government meet its ambitious disinvestment target.

The stake is worth 287.7 billion rupees ($4.5 billion) based on Wednesday’s closing price, and will help meet 40 percent of India’s target to raise 725 billion-rupee target from asset sales in the year ending March. Prime Minister Narendra Modi’s administration exceeded the target for asset sales last year garnering 462.47 billion rupees.

HPCL shares fell as much as 2.4 percent to 540.95 rupees while ONGC dropped 1.6 percent in Mumbai. The S&P BSE Sensex rose as much as 0.2 percent.  

The cabinet approved a plan in April to sell as much as 25 percent of 11 state-run companies, including Rail Vikas Nigam Ltd. and IRCON International, through public offerings.

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The HPCL stake sale may not trigger an open-offer rule as the government’s holding is being transferred to another state-run firm and the ownership isn’t changing, one of the people said. Under India’s takeover code, if a company acquires more than 25 percent in another listed company, it has to make an open offer to buy at least 26 percent more in the target firm.

ONGC had surplus cash of 130.14 billion rupees as on March 31 against 246.9 billion rupees a year earlier, according to an exchange filing.

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