The board of state-owned Oil and Natural Gas Corp (ONGC) today gave 'in-principle' approval to acquire government's 51.11 per cent stake in Hindustan Petroleum Corp Ltd, the company said in a regulatory filing.
The board at its meeting today constituted a committee of directors to "examine various aspects" of the acquisition and "to provide its recommendations to the board of directors", it said.
The government last month had approved sale of its 51.11 per cent stake in oil refiner HPCL to India's largest oil producer ONGC.
Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals Ltd (MRPL) to bring all the refining assets of ONGC under one unit. ONGC currently owns 71.63 per cent of MRPL while HPCL has 16.96 per cent stake in it.
Sources said ONGC will not have to make an open offer to minority shareholders of HPCL as the government's holding is being transferred to another state-run firm and the ownership isn't changing.
The deal will be completed within a year, he said.
HPCL will become a subsidiary of ONGC and will remain a listed company post the acquisition, the source said adding the board of the refining and marketing company will continue to remain in place.
The government has also constituted a committee -- headed by Finance Minister Arun Jaitley and comprising oil minister Dharmendra Pradhan and road minister Nitin Gadkari to work out the modalities of the sale.
Jaitley had in his Budget for 2017-18 talked about creating an integrated oil behemoth. After that oil companies were asked to give their options.
ONGC had evaluated options of acquiring either HPCL or BPCL -- the two downstream oil refining and fuel marketing companies.
It found the nation's second-biggest fuel retailer BPCL too expensive and conveyed its choice to the parent oil ministry.
Sources said the transaction is likely to be completed within this fiscal year.
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.