Oil Ministry working on proposal to merge MRPL with HPCL – EQ Mag
A merger between MRPL and HPCL was mooted soon after ONGC acquired the latter from the government five years ago, but little progress was made. According to the people in the know, the ministry is now pushing for the merger, which is likely to involve a share swap.
An oil ministry proposal is being drafted to merge the two listed subsidiaries of Oil and Natural Gas Corp (ONGC) — Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corp Ltd (HPCL) –according to a report by the Economic Times.
No cash outlay
A merger between MRPL and HPCL was mooted soon after ONGC acquired the latter from the government five years ago, but little progress was made. According to the people in the know, the ministry is now pushing for the merger, which is likely to involve a share swap, as quoted in the report.
A fresh share issue will likely occur between HPCL and MRPL shareholders as part of the merger, which will not require any cash outlay.
In addition to HPCL, ONGC is also a promoter of MRPL. ONGC owns 71.63% of MRPL, followed by HPCL with 16.96%, and the public with 11.42%. ONGC will gain a substantial stake in HPCL from its current 54.9% stake, which will reduce the free float, the report added.
Merger protocol
The oil ministry is likely to seek cabinet approval for the merger of HPCL and MRPL. There were no comments from the oil ministry, ONGC, HPCL, or MRPL.
One person said the HPCL-MRPL merger may have to wait until next year since the regulations require a two-year gap between two mergers. The merger of MRPL’s subsidiary OMPL and itself was completed last year, the report added.
In addition to bringing some tax gains, the merger will consolidate most of the ONGC group’s downstream assets under HPCL. Fuel is sold much more by HPCL than it produces at its refineries due to the company’s vast retail network. By merging with MRPL, it will have in-house access to MRPL’s products.
A majority of MRPL’s products are sold outside Karnataka, which attracts central sales tax (CST). MRPL does not have much of a domestic distribution network. MRPL can cut its CST outgo through a merger, people said, as quoted in the report.
According to a source, MRPL employees may be concerned about a possible transfer to other refineries of HPCL if there is a merger. After ONGC acquired HPCL for Rs 37,000 crore, the oil ministry advised it to merge HPCL, MRPL, and OMPL to consolidate its downstream assets. For a year, HPCL refused to recognise ONGC as its promoter, so their relationship soured.
A merger between OMPL and MRPL was completed after ONGC refused to transfer control of MRPL to HPCL. There has been a change in top executives at ONGC and HPCL over the past year, and the companies are now more open to a merger, according to those cited, as quoted in the report.
Source: PTI
