HPCL refuses to recognise ONGC as promoter, 18 months after merger

Hindustan Petroleum Corp Ltd (HPCL) has for the last one-and-half-years refused to recognise its majority shareholder ONGC as a promoter, according to stock exchange filings.

Oil and Natural Gas Corp (ONGC) in January last year bought the government's entire 51.11 per cent stake in HPCL for Rs 36,915 crore. Following which, HPCL became ONGC's subsidiary.

HPCL management however, has continuously refused to recognise ONGC as its promoter.

In a regulatory filing HPCL made to stock exchanges on July 21, in the shareholding for the quarter ending June 30, 2019, HPCL again listed ONGC as "public shareholder" and not as its promoter.

Just like the previous five quarterly filings, HPCL listed "President of India" as its promoter with "zero" per cent shareholding. ONGC was listed as "public shareholder", owning "77.88 crores" shares or "51.11 per cent" shareholding of the company.

Sources close to ONGC said, IT company Mindtree recognised Larsen and Toubro as its promoter within a day of the engineering giant acquiring a majority stake, but HPCL has steadfastly refused to acknowledge its new promoter, ONGC.

An email sent to HPCL spokesperson seeking comments remained answered.

While HPCL management has been unrelenting, Oil Minister Dharmendra Pradhan in written replies to questions in Parliament had listed the company as a subsidiary of ONGC.

The government too has been treating HPCL as ONGC subsidiary and its headhunter Public Enterprises Selection Board (PESB) on June 17, called ONGC Chairman and Managing Director Shashi Shanker to assist in selecting the new Director (Finance) of HPCL.

Sources said, the chairman of ONGC, as a result of it being the holding company of HPCL, by rule was invited to be on the interview panel to select the director.

Till now, HPCL Chairman and Managing Director Mukesh K Surana would sit on the PESB interview panels for selecting directors.

HPCL Director (Finance) J Ramaswamy retired on February 28, and interviews for the post held by PESB on June 17 selected R Kesavan, who currently is an executive director in HPCL, according to a notice put out by the government headhunter.

For selecting the director of a company where the government or its controlled company has more than 50 per cent stake, PESB panel interviews shortlisted candidates. The panel is assisted by the Secretary of the administrative ministry and the chairman of the company concerned.

The Department of Personnel guidelines states that "in the case of subsidiaries, the full-time Chairman of the holding company is invited to assist the Board."

Sources said going by these guidelines, ONGC Chairman and Managing Director was invited to sit on the interview panel to select HPCL Director (Finance).

Sources said the government had earlier this year asked HPCL to add ONGC as its co-promoter but the oil refining company sought to delay it by seeking further clarifications.

While the promoter tag does not bring any specific privileges to ONGC, a lack of it keeps it out of insider trading regulations as it gets full agenda of every board meeting of HPCL and can be aware of price-sensitive information.

According to the Securities and Exchange Board of India's rules, the entity that owns the controlling stake should be listed as promoter even if it was not the original promoter of the company.

When Indian Oil Corporation (IOC) had bought the government's stake in fuel retailer IBP Co Ltd, it was listed as the latter's promoter in every instance after the deal. The same was the case when IOC acquired a majority stake in Chennai Petroleum Corp Ltd (CPCL).

Since acquiring a majority stake in HPCL, ONGC has only been able to appoint one director to that firm's board.

Sources said Coal India Ltd's governance structure, which the HPCL management has so often cited to allow Surana retain the Chairman and Managing Director designation, even though there cannot be two Chairmen within a group, clearly provides for the holding company chairman to sit on the panel for selecting directors of subsidiary companies.

Coal India is a holding company and has seven subsidiaries. The board of each of the subsidiaries is headed by a chairman and Coal India too has a chairman and managing director to head the board. But on PESB interview panels to select a director or chairman of subsidiary companies, Coal India CMD is invited.