India's biggest explorer Oil and Natural Gas Corporation Ltd. (ONGC) has agreed to buy the government’s majority stake in state-refiner Hindustan Petroleum Corp (HPCL) for 369 billion rupees ($5.78 billion).
India's biggest explorer Oil and Natural Gas Corporation Ltd. (ONGC) has agreed to buy the government’s majority stake in state-refiner Hindustan Petroleum Corp (HPCL) for 369 billion rupees ($5.78 billion).
ONGC is buying the government’s 51.1 per cent stake by paying 473.97 rupees per. The closing price for share for HPCL shares last Friday was 416.2 rupees.
The deal is part of the government’s plans to create an ‘oil major’ which will be able to match the performance of international oil and gas companies.
India is the world’s third biggest oil consumer, importing about 80 per cent of its crude needs.
ONGN said in statement: “We expect that as an integrated oil conglomerate, its performance will be less affected by the volatility of crude prices due to diversification of its cash flows to midstream and downstream presence through HPCL, lower earnings volatility, diversified cash flows and lower business risk resulting in better valuation and higher shareholder value.”
HPCL and ONGC have a complimentary asset portfolio and through this acquisition, ONGC is gaining a midstream and downstream presence and access to a marketing network. The buyout will add HPCL’s 15.8 million tonnes of annual crude refining capacity to ONGC’s portfolio.
Source: Pipeline ME
