New Delhi : State-owned Oil and Natural Gas Corporation (ONGC) will acquire the government’s 51.11 per cent stake in HPCL through a bulk or block deal some time in November or December at the prevailing market price. While the government is keen that the deal, which would fetch it over Rs 33,000 crore at the current market price, is done in October, ONGC wants time to raise the money required for the acquisition, a senior govt official said.
The government’s transaction advisor JM Financial and legal consultant Cyril Amarchand Mangaldas is preparing Information Memorandum (IM) on Hindustan Petroleum Corporation Ltd (HPCL) with India’s largest oil and gas producer, ONGC, in the next 7-10 days. ONGC has appointed SBI Caps and the Citi Group as its merchant bankers for the deal and Shardul Amarchand Mangaldas as legal advisor, who would study the IM to arrive at a valuation for the takeover of the country’s third-largest refining and oil marketing company. The official said ONGC will do the due diligence of HPCL’s assets based on the IM and publicly available information to arrive at the valuation. Negotiations between ONGC and the government will follow if the valuation is vastly different from the one the government has arrived at.
The share purchase would happen through a bulk or block deal at the prevailing market price, he said, adding that going by the pace of things, the deal could happen sometime in November or December.
Both bulk and block deals are done on stock exchanges. A block deal happens when a transaction involves a minimum quantity of 5,00,000 shares or a minimum value of Rs 5 crore between two parties. Such deal takes place through a separate window at the beginning of trading hours for the duration of 35 minutes i.e. from 9.15 am to 9.50 am in a price range of +1% to -1% (plus or minus 1 per cent) of the ruling market price. A bulk deal is a trade where total quantity of shares bought or sold is more than 0.5 per cent of the number of shares of a listed company. Bulk deals happen during the normal trading window provided by the broker. The official said the government’s 51.92 crore shares could be sold to ONGC using either the bulk or block deal. This would also help avoid triggering an open offer.
The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted ‘in-principle’ approval to the strategic sale of the government’s existing 51.11 per cent stake in HPCL to ONGC “along with the transfer of management control, which will result in HPCL becoming a subsidiary company of ONGC”. But since the offer meant a transfer of management control from the government to ONGC, there was apprehension it would trigger Sebi’s takeover code and compel ONGC to make an open offer to acquire an additional 26 per cent stake from minority shareholders, he said. So, the terms of sale have been amended to state that “HPCL will continue to be a government company in terms of section 2(45) of the Companies Act, 2013 and will continue to be controlled by the Government of India through ONGC under the administrative control of the Ministry of Petroleum and Natural Gas”.
