Bid & Tender
ONGC-HPCL Merger by Fiscal Year 18, Stocks Spike

Date : Jul 13, 2017

Oil stocks on Wednesday saw a spike following reports that the ONGC (Oil and Natural Gas Corporation Limited) merger with HPCL (Hindustan Petroleum Corporation Limited) will be completed by the end of this fiscal year. Oil Minister Dharmendra Pradhan confirmed that the merger would be completed by 2017-18. The merger entity is likely to be $ 40 billion dollar in total size. In Wednesday's morning trade, both the ONGC and HPCL rose by almost 3 per cent.


The ONGC stock advanced 2.96 per cent to Rs 164.75 on BSE. It opened at Rs 296 and touched an intraday high and low of Rs 296 and Rs 290.50 respectively, in trade so far. Shares of HPCL gained 2.65 per cent to Rs 351. Other oil stocks like IOC (Indian Oil Corporation) and BPCL (Bharat Petroleum Corporation Limited) also gained. Following up on Finance Minister Arun Jaitley's Budget announcement of creating an integrated oil company, ONGC had evaluated options of acquiring either HPCL or Bharat Petroleum Corp Ltd (BPCL) - the two downstream oil refining and fuel marketing companies.


However, ONGC found the nation's second-biggest fuel retailer BPCL too expensive. It then conveyed its choice to the parent oil ministry, which relayed it to DIPAM (Department of Investment and Public Asset Management). Earlier this month, news agency PTI had reported that the Cabinet is likely to consider this month sale of government's 51 per cent stake in Hindustan Petroleum Corp Ltd (HPCL) to Oil and Natural Gas Corp (ONGC) for over Rs 260 billion in the month of July.


According to the report, the (DIPAM) in the Ministry of Finance was moving a note for consideration of the Cabinet for divesting government's entire 51.11 per cent shareholding in India's third-biggest fuel retailer HPCL to oil producer ONGC. HPCL has a market cap of Rs 51,764.25 and ONGC's bid to buying government's entire 51.11 per cent stake would entail an outgo of Rs 264.50 billion. HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries.