No golden share in HPCL sale

The government is not ready to test the British model of disinvestment. There is no "golden share" clause in the transaction documents for the disinvestment of Hindustan Petroleum Corporation Ltd (HPCL), which the government expects to sell by December.

A golden share would have meant that the government could veto any resolution made by the board of directors of the disinvested entity by virtue of holding one token share in it.

Government officials told Business Standard that keeping in mind the strategic importance of the oil sector, some stipulations would be placed on the new promoter of HPCL, but there was no golden share clause, which would require changes to the Companies Act, 1956.

Instead, the government will insist on retaining those clauses in the draft shareholders' agreement that will prevent the strategic partner from altering the memorandum of association, disposing of assets and winding up the company.

The strategic partner will have to seek permission from the government for venturing into any business outside the hydrocarbon sector, issuing shares, converting debt into equity and investing HPCL's reserves in other group companies.

The transaction documents also provide the government the power to nominate two directors on the 12-member board of the company as long as it holds a 5 per cent stake in it.

As is the norm, retrenchment of employees will not be allowed for a year after the selloff. The officials said the formula would be replicated for the sale of other strategic companies.

The government holds a 51.01 per cent stake in HPCL. It proposes to sell 34 per cent to a strategic partner by November. The main parties in the fray are Reliance, Royal Dutch Shell, Petronas, Kuwait Petroleum and Chevron Texaco.

The bidders are likely to start due diligence by next week, which will be followed by visits to the company's refineries in Mumbai and Visakhapatnam. HSBC Securities is the global adviser for the selloff.