ONGC rejects share-swap deal for HPCL-MRPL merger

Hindustan Petroleum’s (HPCL) plan to acquire Mangalore Refinery and Petrochemicals (MRPL) has reportedly hit fresh hurdles after its parent company ONGC stressed on a cash deal instead of a share swap.

According to a PTI report, ONGC (Oil and Natural Gas) preferred a cash transaction as the value of HPCL shares are declining.

Both HPCL and MRPL are refining subsidiaries on ONGC. Last year, ONGC acquired HPCL in an Rs369.15bn ($5.29bn) deal, while it holds a 71.63% stake in MRPL.

Following the acquisition of HPCL, initiatives to combine the two refining subsidiaries were under consideration citing operational synergies.

If it materialises, the merger will create the third largest oil refiner in the country.

The plan initially involved a combination of cash and share–swap but ONGC later emphasised on an only-cash transaction following a decrease in HPCL share prices.

Last January, ONGC acquired a 51.11% stake in HPCL at Rs473.97 per share. The same share price currently stands at Rs282.60, the PTI report added.

Sources told the news agency that HPCL is yet to come up with a concrete acquisition proposal, following which, the merger discussions will begin.

HPCL presently holds a 16.96% stake in MRPL and can acquire the latter by acquiring ONGC’s shares, which values around Rs93bn ($1.33bn).

HPCL currently has 23.8 million tonnes (Mt) of annual oil refining capacity, while the MRPL refinery has a capacity of 15Mt.

The merger will create the second-biggest state-owned oil refiner in India and the third biggest overall after Indian Oil and Reliance Industries.