NEW DELHI: The Union government is set to cross its annual divestment target (Rs 72,500 crore) for the first time with state-run oil giant Oil and Natural Gas Corp (ONGC) announcing on Saturday that it will pick up the government’s 51.11 per cent stake in Hindustan Petroleum Corp Ltd. (HPCL) for Rs 36,915 crore.
The all-cash off-market deal will be completed by the end of the month. It is set to push the government’s income from disinvestment for the current financial year past the Rs 90,000 crore mark. According to government sources, it has already raised Rs 54,337.60 crore so far in FY18 against its annual target of Rs 72,500 crore.
The ONGC-HPCL deal will add Rs 36,915 crore to that account.
“The ONGC Board on January 19, 2018 considered the proposal and approved an acquisition of the entire 51.11 per cent shareholding (778,845,375 equity shares) of the President of India, at a cash purchase consideration of Rs 473.97 per share,” the company said.
The valuation of the off-market deal comes at a significant premium, 14 per cent more than HPCL’s closing share price on Friday, and over 10 per cent more than the 60-day weighted average. However, sources say both companies’ valuation advisors and third-party consultants had advised a valuation in the range of Rs 475 to Rs 500 per share.
The deal brings with it several advantages for the combined entity. According to its statement, ONGC will become India’s first vertically integrated ‘oil major’ company, having a presence across the entire value chain.