HPCL may acquire Mangalore Refinery and Petrochemicals in share-swap deal

HPCL may acquire Mangalore Refinery and Petrochemicals Ltd (MRPL) in a cash and share- swap deal to become India's third-largest oil refiner, a top official said. Oil and Natural Gas Corp (ONGC), India's biggest oil and gas producer, last week announced acquisition of HPCL for Rs 369.15 billion. After this takeover, ONGC has two refining subsidiaries - HPCL and MRPL. "If MRPL comes to HPCL, we can bring lot of synergy," HPCL Chairman and Managing Director Mukesh Kumar Surana told PTI. For one, HPCL (Hindustan Petroleum Corp Ltd) sells more petroleum product than it produces and bringing MRPL's 15 million tonne a year refinery under the fold would help bridge the shortfall. Also, there can be synergies in crude oil procurement as well as in optimising refinery set-up, he said. ONGC plans to maintain HPCL as an independent listed company under whom all its downstream units can be consolidated. "MRPL is not a new company for us. It was in fact an HPCL company before ONGC in 2003 acquired joint venture parter A V Birla Group. We will hold close to 17 per cent stake in MRPL and so we know the company well," he said. The merger "may be a good thing to do in the interest of the (ONGC) group," he said. Yesterday, ONGC Chairman and Managing Director Shashi Shanker said his company will also consider merging MRPL with HPCL at a later date. The Boards of the two companies have to consider the proposal and take a decision on it, he said. While ONGC holds 71.63 per cent stake in MRPL, HPCL has 16.96 per cent. Surana said discussions on the merger have not started but they should start soon. The merger can be through "share-swap plus cash," he said. HPCL can acquire MRPL either by buying out ONGC's shares, which at today's trading price is worth just over Rs 16,000 crore.

The other option is share-swap, wherein ONGC will get more shares in HPCL in lieu of it giving up its control in MRPL, the official said. A third option and more preferable is a combination of the two, he said. After ONGC completed acquisition of the government's 51.11 per cent shares, HPCL will become a subsidiary. The transaction allows the government to monetise its HPCL ownership without losing ultimate control of the company. "We will continue to remain a central public sector enterprise (CPSE)," Surana said. HPCL will add 23.8 million tonne of annual oil refining capacity to ONGC's portfolio. This together with 15 million tonne refinery of MRPL will create India's second-biggest state-owned oil refiner after Indian Oil Corp (IOC). Overall, it will become the third biggest refiner behind IOC and Reliance Industries. MRPL will be the third refinery of HPCL, which already has units at Mumbai and Visakhapatnam.