Published: Thu, March 02, 2017
Economy | By Melissa Porter

HPCL stock falls 5 percent amid buzz of likely acquisition by ONGC

HPCL stock falls 5 percent amid buzz of likely acquisition by ONGC

While they sought to play it down, they also pointed out to the fact that the government had already announced the creation of an integrated oil company.

Last week, The Economic Times reported that the government is considering integrating either HPCL or Bharat Petroleum (BPCL) with ONGC. The earnings of the vertically integrated ONGC- HPCL would be more stable, and investors would benefit from the reduced volatility.

The Indian government is looking to transfer its majority stake in state-owned refiner Hindustan Petroleum Corp.

While the ONGC was up 0.56% at Rs 196.75, HPCL was down 0.53% at Rs 567.95.

Oil and Natural Gas Corporation (ONGC) may acquire the complete stake in Hindustan Petroleum Corporation Limited (HPCL) for a $6.6 billion (nearly Rs 44,000 crore) deal, sources told PTI.

The aim of the merger is not the creation of an oil giant, rather the government's strategy is to create a company with operations from exploration to refining and retail, the report quoted officials as saying. During the day, it dipped 5 per cent to Rs 531.20.

The government is planning to create a huge oil firm by combining state-run companies, Finance Minister Arun Jaitley had said in his Budget speech on February 1 as the country, which is the world's third biggest consumer of oil, is looking to compete with world's major players in acquiring worldwide assets. Finance Minister Arun Jaitely in his Budget 2017-18 speech had announced the setting up of an integrated oil company after about 12 years of a similar proposal suggested by the then oil minister Mani Shankar Aiyer.

The source said ONGC buying HPCL will require two sets of Cabinet approval - one where the government approves sale of its all or part of its 51.11 per cent stake to ONGC, and the other for allowing ONGC to spend the money on stake buy.

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