India's state-owned Oil and Natural Gas Corporation (ONGC) is reportedly seeking to acquire a majority stake in the fuel retailer Hindustan Petroleum Corporation (HPCL) in a deal worth Rs 440bn ($6.6bn).
The move is part of the Indian government’s effort to create an integrated public sector oil entity.
ONGC is planning to acquire the government's 51.11% stake in HPCL, reported Press Trust of India.
An open offer will also be made by ONGC at a later stage to acquire additional 26% stake in HPCL from other shareholders.
A source familiar with the development was quoted by the news agency as saying: “The government is looking at creating an integrated oil company and the idea is to merge an oil producer with a refiner."
The acquisition is expected to add HPCL’s 23.8 million tons of annual oil refining capacity to ONGC's portfolio.
It is also expected to enable ONGC to become one of the largest Indian refiner after Indian Oil Corporation (IOC) and Reliance Industries and helps it to compete with global oil majors in acquiring foreign assets.
Last week, The Economic Times reported that the government is considering integrating either HPCL or Bharat Petroleum (BPCL) with ONGC.
The plan was seen to be in line with the budget announcement to "create an integrated public sector oil major which will be able to match the performance of international and domestic private sector oil and gas companies.”
HPCL currently owns and operates two refineries, one in Mumbai, West Coast with 6.5 million metric tons per annum (MMTPA) capacity and the other in Visakhapatnam, East Coast with 8.3 MMTPA of capacity.
Image: HPCL’s oil refinery in Visakhapatnam, India. Photo: courtesy of IM3847 at English Wikipedia.