In line with government's intention to create an integrated energy company with interests in exploration, production, refining and marketing of the fuel in both India and abroad, the he Union Cabinet on Wednesday gave an in-principle approval to the proposed acquisition of government's 51.1% stake in Hindustan Petroleum Corporation (HPCL) by Oil and Natural Gas Corporation (ONGC), paving the way for an Indian oil and gas giant.
This will result in HPCL becoming an ONGC subsidiary though the capital market regulator may exempt the latter from making an open offer to buy another 26 percent stake from the public. As per the norms of Securities and Exchange Board of India, a company has to make an open offer to buy another 26 percent of the target company if it buys 25 percent or more in the latter.
MK Surana, CMD, HPCL said the valuation has to basically be decided between buyer and seller, which is based on many consideration, and market value of the share could be one of the guidance but that is not the only thing that guides the share prices whenever there is a majority transfer of one shareholder to another.
There are basically three parties involved, the government who is a seller, ONGC the buyer and HPCL management has the responsibility of facilitating the deal transaction based on Companies Act and Sebi Takeover Act, said Surana in an interview with CNBC-Tv18
However, independent valuation could be a prudent thing to do, said Surana adding that they would give an opinion regarding that at the appropriate forum.
Although agreeing with the fact that it looks unfair that minority shareholder approval is not needed, he said the company will do whatever is lawfully correct.
When asked whether he was happy with the deal, Surana said since HPCL will continue to be an independently listed company, it will continue to create value for long-term shareholders.
Details and the contours of the deal will be soon be made public, said Surana
Talking about MRPL merging with HPCL, he said if it happens it will be a big positive and also makes logical sense but post-merger both remaining separate listed companies does not make sense because ONGC is focused on upstream, while HPCL on downstream.
While it is most likely that MRPL will be subsumed into HPCL and may not be a subsidiary. However, no proposals have yet be taken to the Boards.
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