FROM OUR CORRESPONDENT
SIVASAGAR, Jan 20: Oil and tural Gas Corporation Ltd. (ONGC) and the President of India have been engaged in discussions on a potential transaction for purchase by ONGC of the President’s shareholding of 51.11 per cent in Hindustan Petroleum Corporation Limited (HPCL) in furtherance of the budget announcement by the Government of India for creating an ‘oil major’ which will be able to match the performance of intertiol and domestic private sector oil and gas companies.
ONGC Board on January 19 considered the proposal and approved acquisition of the entire 51.11 per cent shareholding (778,845,375 equity shares) of the President of India, at a cash purchase consideration of Rs 473.97 per share with a total acquisition cost of Rs. 36,915 crore.
ONGC has entered into a share purchase agreement with the President for acquiring the 778,845,375 equity shares of HPCL (representing 51.11 per cent of HPCL) on January 20. The parties expect to complete the transaction before end of January, 2018.
As the Government of India (GOI) through President of India, being the promoter of ONGC (holding 67.72 per cent) and HPCL (holding 51.11 per cent) is the seller, the transaction is a related party transaction between the government and a government company within the meaning of the SEBI (Listing Obligations and Disclosure Requirements) Regulation 2015 (LODR) and the Companies Act 2013 (Act).
The acquisition has been undertaken in furtherance of the government’s objective to combine the various central public sector enterprises to give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders and create an ‘oil major’ which will be able to match the performance of intertiol and domestic private sector oil and gas companies.
ONGC expects that as an integrated oil conglomerate, its performance will be less affected by the volatility of crude prices due to diversification of its cash flows to midstream and downstream presence through HPCL, lower earnings volatility, diversified cash flows and lower business risk resulting in better valuation and higher shareholder value.