India plans to ask state-run Oil and Natural Gas Corp to consider launching a rights issue to help fund green projects at refining arm Hindustan Petroleum Corp, two sources said, an exercise that could raise about $1.9 billion.
The comments come after India’s finance minister announced a plan this year to provide equity of 300 billion rupees ($3.6 billion) to help the big state oil refiners move towards cleaner energy.
The government is weighing options for HPCL, including directly providing loans at preferential rates, said the sources, who have direct knowledge of the matter. They sought anonymity as they were not authorised to speak with media.
The oil ministry is awaiting a response from the finance ministry on the plan for ONGC to launch a rights issue, one of the sources said.
Based on rights issues previously announced by two other state refiners, an ONGC issue could amount to about 155 billion Indian rupees ($1.86 billion), Reuters calculations show.
In 2018, New Delhi sold its entire stake of 51.1% in HPCL to ONGC, making the firm a subsidiary of India’s top energy explorer. The government holds a stake of 58.93% in ONGC.
Initially, the government had planned to infuse funds into HPCL by allocation of preferential shares, but that risked pushing ONGC’s stake below 50% and ending the government’s indirect control of HPCL, one of the sources said.
ONGC, HPCL and the oil and finance ministries did not immediately respond to requests for comment.
India’s other big state refiners, Indian Oil Corp and Bharat Petroleum Corp have announced plans to launch rights issues of 220 billion and 180 billion rupees, respectively.
The government has a 51.5% stake in IOC and 52.98% share in BPCL.
However, a lack of clarity from the government over how to infuse funds into HPCL has delayed the launch of rights issues for IOC and BPCL, sources said. Those issues had earlier been planned by the end of October, sources have said.
Combined, the three refiners aim to invest 3.5 trillion to 4 trillion rupees to reach a goal of net-zero emissions by 2040.
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