In a major deal, India’s largest explorer Oil and Natural Gas Corp (ONGC) has agreed to buy the government’s majority stake in state-refiner Hindustan Petroleum Corp for 369 billion rupees ($5.78 billion).
According to an official release, ONGC will pay a premium of about 14 percent on HPCL’s current market price for the 51.1 percent stake, the company. It expects to complete the transaction by end-January. The deal is part of the government’s objective to combine various public sector enterprises ‘to give them the capacity to bear higher risks’ and create more value for shareholders.
Purchasing a stake in India’s third biggest state-owned refiner would also help ONGC to diversify its cash flow and reduce its vulnerability to changing global crude prices.
Finance minister Arun Jaitley also stated that a national oil major will formed combining other state-owned firms. India also wants to expand in global oil markets to meet its growing domestic demand for fuel.
India has about a dozen state-owned oil and gas companies, with significant overlaps in operations. Single handedly they do not have the financial clout to rival global oil majors in bids for overseas exploration and production assets.