The Union Cabinet has given in-principle approval for sale of the government’s 51.11 percent stake in Hindustan Petroleum Corporation (HPCL) to oil producer Oil and Natural Gas Corporation (ONGC). The stakes will be sold for a potential Rs 26,000 crore to Rs 30,000 crore. However, the actual price may be based on the one year, 26week or 60day average price.While ONGC buying HPCL will help the government meet as much as 40 percent of its target for raising Rs 72,500 crore in the current fiscal through stake sales, other deals in the oil sector may be in the offing.Prior to this merger, HPCL may take over Mangalore Refinery and Petrochemicals (MRPL) to bring all the refining assets of ONGC under one unit. Presently, ONGC owns 71.63 percent stakes of MRPL while HPCL has 16.96 percent stake in it.ONGC has cash reserves of Rs 13,014 crore. And to finance the stake acquisition in HPCL, it will have to borrow at least Rs 10,000 crore.
HPCL will be a subsidiary of ONGC and will remain a separate entity post acquisition. The deal could be completed within a year.