Newspatrolling: Aiming to create an oil giant that can compete with global companies, the Union Cabinet today approved the merger of HPCL with ONGC. As per the approval, 51 percent stake in HPCL will be sold to ONGC. It is estimated that the deal will be completed within a year’s time. The deal has been exempted from open offer. After the deal is complete, ONGC will become the owner of brand HPCL. HPCL will continue to function as a subsidiary of ONGC and there will not be any major changes in its board. Stocks of both companies gained on the stock markets, with ONGC shares rising by one percent, whereas HPCL gained by over 4 percent.
The government will gain from the merger, as it will continue to control the combined entity. Speaking about the merger, Oil Minister Dharmendra Pradhan said, “ONGC has forwarded a proposal to acquire HPCL. Process for in-principle approval for this proposal has been initiated.” The merger is expected to help the government achieve 38 percent of its disinvestment target of Rs 72,500 crore for this fiscal. During the Union Budget, Finance Minister Arun Jaitley had said that consolidations of public sector enterprises will improve risk taking capabilities, enable economies of scale, and create more value for shareholders.