The long-drawn slugfest between ONGC and HPCL over latter's repeated failure to recognise the state-run explorer as its parent may upset gains from such a consolidation exercise aimed at creating an entity with a significant presence in entire oil chain.
ONGC had planned the merger of Mangalore Refineries and Petrochemicals Ltd (MRPL) with HPCL long before it bought the government's entire 51.11 per cent stake in HPCL for Rs 36,915 crore last year.
With HPCL, however, continuing to play hard ball over the promoter issue and listing ONGC as a public shareholder for the fifth consecutive quarter in its latest regulatory filing on April 18, sources said the MRPL-HPCL merger has got further delayed and is unlikely to be completed even in the current fiscal.
"The ONGC-HPCL slugfest has ensured that neither the MRPL board has taken up the issue of merger, nor any consultant appointed to oversee and conclude the process," a source familiar with the developments said.
"Even if government's intervention resolves the issue between the two PSUs in the next couple of months, the merger could take a further year to conclude. So, the acquirer has to suffer more."
The government holds 88.58 per cent stake in MRPL. Of this, ONGC holds 71.63 per cent while HPCL has 16.93 per cent.
ONGC planned to synergise its refining operations post-the HPCL deal by merging the two subsidiaries. That would have created a giant downstream entity with a refining capacity of 35 million tonnes and a retail network of 15,000 pumps.
The merger would also have ensured freight advantage with ONGC's refineries loicated on both sides of the Indian coast.
By being classified as public shareholder, ONGC also risks losing the regulatory exemption from making an open offer to other shareholder of HPCL, as part of the deal.
An open offer for another 26 per cent stake in HPCL could cost ONGC a further Rs 18,000-19,000 crore that would be too heavy to bear for the company that has already taken a big loan to complete the HPCL acquisition.
In a regulatory filing made on April 18 on its shareholding pattern at the end of March, HPCL listed the "President of India" as its promoter with "zero" per cent shareholding. ONGC was listed as "public shareholder", owning "77.88 crore" shares or "51.11 per cent" shareholding of the company.
With the HPCL management continuing to block ONGC's attempts to assert its authority, the upstream parent's chief is unable to chair the HPCL board or intervene in other matters pertaining to the refiner.
HPCL will face the real test when the vacant posts of directors of the company are filled soon.
It is expected that ONGC Chairman Shashi Shankar, by virtue of being the head of HPCL's holding company, will sit on the interview panel that will select the latter's Director of Finance.
"This should end all controversies surrounding the promoter issue. The Petroleum Ministry has also put its weight around HPCL to recognise ONGC as its promoter. The matter should be resolved soon," a Ministry official said.
(Subhash Narayan can be contacted at subhash.n@ians.in)
--IANS
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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)