ONGC is all ready to authorise synergy within its subdivisions after getting sanctions to obtain a 51.11 per cent stake in Hindustan Petroleum Corporation Ltd—a state-owned natural gas and oil company.

According to Shashi Shanker, ONGC Chairman and Managing Director, the retail infrastructure of HPCL will be put to use for marketing products from ONGC’s other functional assets. He also added that HPCL, as a Central Public Sector Enterprise, will continue to be an independent entity. As of now, this is an acquisition, not a merger.

Shanker also pointed out that “Chairman” is not a very important term or designation. The new board of HPCL will bear similarities to the board arrangements of other subsidiaries such as Mangalore Refinery and Petrochemicals Ltd (MRPL) as well as ONGC Videsh Ltd (OVL); there will be a non-executive chairman and a Managing Director.

Shanker mentioned that they have sought proposals from banks, but they are yet to find out what the financial institutions have to say. In order to finance the deal, the most attractive option would be chosen out of approvals for INR 35,000 crore. On being asked about whether the deal was a strategic sale or a divestment, Shanker simply answered that it was just a deal.

The Managing Director of ONGC also told that HPCL would be in a position of advantage owing to the fact that they would be obtaining large volumes of crude along with MRPL. However, even though they produced few of the best grades of crude oil, they don’t have the option to allocate crude oil; they have been seeking permission from the government.

Apart from that, in order to ensure synergy, ONGC Petro Additions Ltd (OPAL) products could be marketed via retail networks. With respect to HPCL’s cross holding with ONGC, the decision would be taken at appropriate time.

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Adam Paul is the Vice President of Content Development for Trends Desk. He holds more than 10 years of understanding in supervising content for technology professionals, and authored 3 books and hundreds of articles in chemical arena. He was executive editor at one of the leading news portals and authored a popular column identifying trends in chemical industry.

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