Post this sale, the share of Eni spA group in Hindustan Oil Exploration Company will come down to 22 percent, says P Elango, the company's managing director.
Investment into Hindustan Oil Exploration Company (HOEC) by Ashok Goel, through the Ashok Goel Trust and Rohit Dhoot through listed entity Dhoot Industrial Finance Ltd., among others, is a financial deal undertaken in an individual capacity, says P Elango, MD, HOEC.
On Tuesday, HOEC informed the exchanges of a 24.75 percent stake sale.
Post this sale, the share of Eni spA group, the original promoter of HOEC before moving to a management role, will come down to 22 percent, he says.
In an interview to CNBC-TV18, Ashok Goel also clarified that although his family trust is a part of the Essel Propack group, the company has nothing to do with the deal.
Goel said the stake was bought at a discount to the market price for a total of about Rs 60-65 crore.
Elango said HOEC is on track to complete the Assam gas field project and is awaiting final environmental clearance, likely to come by April.
He said the company will target supplies from the Assam project by the last quarter of FY17.
Below is the verbatim transcript of P Elango & Ashok Goel's interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.
Reema: Explain this block deal or stake transfer which has taken place. Who is the Ashok Goel Trust? I am guessing they are not part of promoter entity. Who are the sellers in this particular transaction?
Elango: This is a transaction between Eni group companies and Ashok Goel Trust. Ashok Goel Trust is founded by Ashok Goel, a part of Essel Propack group. They have done financial investment in individual capacity. As a financial investor, it is known to the market that Eni was supporting the new management team and that they would not be investing further in the company. Therefore, this is a way that it gets support from a wider base of investors.
Latha: Mr Ashok Goel will not be counted as promoter. He will be a minority investor?
Latha: He gets a board seat?
Elango: No, he doesn't get a board seat.
Reema: What will the promoter holding come down to? Currently it's at 47.1 percent as of December end?
Elango: Yes and after this transaction of 24.75 percent it will come down to about 22 percent.
Latha: Which means the entire stake went from Eni's part of Ashok Goel?
Elango: Yes. There are two individuals. One is Ashok Goel and second is from a listed company Dhoot Industrial Finance, which has taken 4.75 percent. So both of them acted in concert and concluded.
Latha: Are they related, Ashok Goel and Dhoot?
Elango: They are not.
Reema: You indicated that the Eni group had indicated that they do not want to make fresh investment into the company. Can we understand that from the current 22 percent stake that they now hold post this sale, they would be interested in selling stake further?
Elango: Not really. The primary interest Eni had was to dilute their stake below 25 percent. Therefore, the accounts of this company don't get consolidated as a group company of Eni. Eni will also seek it as a financial investment.
Latha: Can you update us on your position in Assam and the exploration activity there?
Elango: We are on track as far as Assam is concerned; all the contracts have been awarded, the rigs have been secured and as far as the final clearance that is required from environmental clearance, the hearing is scheduled in April. Once we have that then we should be able to complete the project and deliver first gas by end of the last quarter of this financial that is between January and March 2017 as we promised to the market.
Latha: That will reflect in your revenues this year, in FY17?
Elango: It will reflect in the revenue of next year.
Latha: FY17 revenues will reflect the gas sale?
Elango: Absolutely. The good development is Brahmaputra gas plant has been commissioned which will ultimately consume this gas that we produce.
Reema: Was the stake sale done at the market price, this transfer of 24 percent stake and are there any synergies in getting the Essel Propack promoter as a financial investor into the company. Are there any synergies for HOEC?
Elango: Not really. It's only a financial transaction but it removes one of the hangover about Eni being a promoter and not willing to invest in future of the company as such. This opens opportunity for us to raise fund as a company as and when we require by any form of capital either debt or equity. However, for Assam, we already have the required funding. We do not need any fund to execute Assam. Our plans is to execute Assam first, build credibility in the market then reach the market at the right time to raise the resources.
Reema: Is this just a first step by Ashok Goel perhaps to increase his stake further in the company maybe once it crosses 25 percent, there could be an open offer. If assume that HOEC need some money, some capital and maybe Ashok Goel would be interested in putting in some more money. Is there a possibility that he would be looking at increasing his stake in the company?
Elango: It's totally unrelated business and transaction has been done as financial investment. However, as I said the company is not in need of money for putting Assam project and being a listed company, we have got multiple ways of raising the fund that is required and we want to take one step at a time.
Latha: What is the quantum of gas that you expect to mine in FY17? How much in FY18 and how much will revenues increase in FY17 for you?
Elango: We expect the gross production. This is a joint venture between HOEC, Oil India and Indian Oil Corporation (IOC). These are the three partners in this joint venture. We expect to produce 20 million cubic feet of gas per day which is equal to 6 lakh cubic meter of gas per day. Overall it's a low operating cost field but depending on how the gas price turns out, the revenue for the company, net of operating should get about USD 7 million per year.
Ashok Goel, VC & MD, Essel Propack
Nigel: Could you run us through a few details? Have you bought this stake? How much of stake has the Ashok Goel Trust bought in HOEC and could you tell us whether or not it is in your personal capacity or is it in Essel Propack, that is the listed company’s name?
Goel: First of all, there is nothing called Essel Propack Group. Essel Propack is an entity. Ashok Goel is a different entity. So, this has been purchased by Ashok Goel Trust which is a family trust which has nothing whatsoever to do with Essel Propack except Ashok Goel Trust might be part of the promoter group. So, Essel Propack has nothing whatsoever to do with this transaction. Second, Ashok Goel Trust has not come into the shoes of Eni who is the promoter of HOEC. We have only acquired the shares which means, we will be just like any other ordinary shareholder.
Number three, I have acted this in concert with a friend of mine, Mr Rohit Dhoot, and therefore, because we have acted in concert, the disclosures that has been made to the stock exchange is only one and so total shares that both of us have acquired is 24.75 percent. And internally, between me and Rohit Dhoot, we hold just about 50-50, little less, little more.
Nigel: So, just to get this right, Ashok Goel Trust holds stake now, both in HOEC, that will be roughly around 12.5 percent and holds stake in the Essel Propack Group, but there is no relation whatsoever between this investment that you are making in HOEC, in terms of Essel Propack.
Goel: Exactly. Absolutely right.
Nigel: So, this total 24.5 percent stake, how much did it come to?
Goel: It is there in the filing which Eni has done to the stock exchange which is a public document. The total investment is about Rs 60 odd crore.
Nigel: Alright, because the current market capitalisation of HOEC is around Rs 430 crore. So, 24 percent stake approximately will come to around Rs 100 crore plus. So, what price was this done at then?
Goel: So, obviously, we have bought it at a discount to the market and it is there in the filing.
Nigel: So, the total 24.5 percent stake, you have paid only around Rs 60 crore for it?
Goel: It is there in the document. I think my family office have done this, so I do not exactly remember the amount, but it should be Rs 60-65 crore.
Nigel: As you said, you are going to be a normal investor in the company. There is not going to be any boat seat as well. But, going ahead, will there be any such plans that you go ahead, you try to get a boat seat in the company. Also, could you tell us that at any point of time, will you be looking to up the stake from around this 24.5 percent stake?
Goel: We have no intention to get into the shoes of the promoters or in the shoes of the management whatsoever. So, therefore, we have no such plans and we will let the current management run the business the way they are running, because we have faith in them and I think they are a good team. They are working together. They are experienced and straightforward management team, as we understood talking to them. And that is why we took the shares.