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HPCL likely to acquire MRPL in cash, share-swap deal

HPCL may acquire Mangalore Refinery and Petrochemicals Ltd (MRPL) in a cash and share- swap deal to become India’s third-largest oil refiner, a top official said.

Oil and Natural Gas Corp (ONGC), India’s biggest oil and gas producer, last week announced acquisition of HPCL for Rs 36,915 crore. After this takeover, ONGC has two refining subsidiaries – HPCL and MRPL.

“If MRPL comes to HPCL, we can bring lot of synergy,” HPCL Chairman and Managing Director Mukesh Kumar Surana said.

For one, HPCL (Hindustan Petroleum Corp Ltd) sells more petroleum product than it produces and bringing MRPL’s 15 million tonne a year refinery under the fold would help bridge the shortfall.

Also, there can be synergies in crude oil procurement as well as in optimising refinery set-up, he said. ONGC plans to maintain HPCL as an independent listed company under whom all its downstream units can be consolidated.

“MRPL is not a new company for us. It was in fact an HPCL company before ONGC in 2003 acquired joint venture partner A V Birla Group. We will hold close to 17 per cent stake in MRPL and so we know the company well,” he said.

The merger “may be a good thing to do in the interest of the (ONGC) group,” he said.

On Sunday, ONGC Chairman and Managing Director Shashi Shanker said his company will also consider merging MRPL with HPCL at a later date. The Boards of the two companies have to consider the proposal and take a decision on it, he said.

While ONGC holds 71.63 per cent stake in MRPL, HPCL has 16.96 per cent. Surana said discussions on the merger have not started but they should start soon. The merger can be through “share-swap plus cash,” he said.

HPCL can acquire MRPL either by buying out ONGC’s shares, which at today’s trading price is worth just over Rs 16,000 crore. The other option is share-swap, wherein ONGC will get more shares in HPCL in lieu of it giving up its control in MRPL, the official said.

A third option and more preferable is a combination of the two, he said. After ONGC completed acquisition of the government’s 51.11 per cent shares, HPCL will become a subsidiary.

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