ONGC eyes HP stake in Mangalore Refinery

With this, ONGC's stake in the refinery will climb up to 88.57%.

Oil and Natural Gas Corporation (ONGC) is eyeing Hindustan Petroleum Corporation's 16.97 per cent stake in its subsidiary, Mangalore Refinery and Petrochemicals Ltd. With this, ONGC's stake in the refinery will climb up to 88.57 per cent and the public sector major will become its sole promoter.

Petroleum ministry officials told Business Standard the company had put up the proposal with the government, but nothing had been finalised yet.

"ONGC has approached the ministry with the proposal. Discussions are still on," an official said.

This is the second attempt of the public sector oil major to acquire the stake. The earlier one was thwarted when the disinvestment plan for Hindustan Petroleum was put on hold in 2003.

ONGC has now revived the proposal, even as it plans to pump in Rs 8,000 crore as investment to expand the refinery's capacity to 15 million tonnes per annum (mmtpa). The current capacity of the Mangalore Refinery stands at 9.69 mmtpa. The expansion is to be completed by 2009.

"The earlier proposal is a dead issue now and circumstances have changed considerably since then. Hindustan Petroleum's assent is necessary for the deal to happen," a ministry official said.

Oil and Natural Gas Corporation came very close to acquiring HP's stake in 2003 when the proposal was cleared by boards of both the companies. ONGC had okayed the decision to buy the stake at a consideration of Rs 1,121.75 crore.

However, this did not happen as the government put Hindustan Petroleum's disinvestment on hold. In 2003, ONGC bought out Aditya Birla group's 37.4 per cent stake in the then loss-making Mangalore Refinery for Rs 59.43 crore at Rs 2 per share.

It also bought out 20 per cent equity held by various financial institutions. ONGC then infused Rs 600 crore capital as part of a debt restructuring package (DRP) approved by financial institutions.