The Hindu Business Line : Post-buyout of HPCL stake — ONGC has to make 13 pc public offering in MRPL

POST buyout of Hindustan Petrochemicals Ltd's (HPCL) stake in Mangalore Refineries and Petrochemicals Ltd (MRPL), Oil and Natural Gas Corporation (ONGC) will be required to make a public offering of around 13 per cent of its stake in MRPL, according to the Finance Ministry.

ONGC is set to conclude its purchase of 16.95 per cent stake of HPCL in MRPL. Currently, ONGC holds 71.63 per cent equity in MRPL and after the buyout, ONGC's stake in MRPL will rise to 88 per cent.

In this backdrop, the Finance Ministry has said that the public holding in MRPL should be at least 25 per cent.

The Finance Ministry's letter comes in the wake of a thinking within Securities and Exchange Board of India that listed companies be required to maintain at least 25 per cent of public holding in them.

Interestingly, the Finance Ministry is understood to have `advised' ONGC to put in abeyance its ultimate proposal to merge ONGC with MRPL. During a recent meeting with the Finance Secretary, Mr D.C. Gupta, ONGC was asked the reasons behind the proposed merger, Finance Ministry officials said. When told about the merger plans, the company was informed that this would lead to a potential revenue loss of Rs 1600 crore.

This, since ONGC has been making sizeable profits over the last few years while MRPL has been bleeding in the same period. A merger would help set off past losses of MRPL against profits of ONGC, thereby resulting in a lower tax liability for ONGC.

Late last year, in a step towards the merger, ONGC board approved buyout of HPCL's 16.97 per cent stake in MRPL for Rs 1,1221.75 crore at Rs 37.75 per share. The issue of merger was discussed during the September 25 meeting of the ONGC board.

However, it was put off. In a sense, a merger would mean that ONGC would get the MRPL refinery for free in two years' time from the point of taking a controlling stake in MRPL in early 2002.

Sometime back, ONGC bought out Aditya Birla group's 37.4 per cent stake in the beleaguered MRPL for Rs 59.43 crore at Rs 2 per share. It then infused Rs 600 crore capital as part of a debt-restructuring package approved by the financial institutions.

The package resulted in ONGC netting 51.25 per cent stake in MRPL with joint venture partner HPCL's stake coming down from 37.4 to 16.97 per cent. Later in June, ONGC bought out financial institutions and banks' stake in MRPL (20.9 per cent stake) for roughly Rs 370 crore.

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