 "ONGC")
The government has asked Hindustan Petroleum Corp Ltd (HPCL) to add ONGC as its co-promoter but the oil refining company has sought further clarifications before adhering to the direction, a top company official said.
Oil and Natural Gas Corp (ONGC) had in January last year bought the government's entire 51.11 per cent stake in HPCL for Rs 36,915 crore. Thereafter, it sought to be identified as the company promoter but HPCL continues to list "President of India" as its promoter with "zero" per cent shareholding. ONGC is listed as "public shareholder", owning "77.88 crores" shares or "51.11 per cent" shareholding of the company.
HPCL Chairman and Managing Director Mukesh K Surana acknowledged that the government has written to the company asking it to recognise ONGC as co-promoter but "we have asked for certain clarifications" on the said directive.
He sidestepped regulatory issues like insider trading regulations not applying on ONGC because of it not being listed as a promoter. It has a nominee on HPCL board but the Sebi's insider trading regulations are not applied to it because it is not classified as a promoter.
Surana said the transaction, which was aimed at meeting the government's disinvestment target, was based on the premise that "HPCL will maintain its separate identity, its separate brand, its separate culture and it will be independently board managed Central Public Sector Enterprise (CPSE)."
"To that extent, there were statements made by ministers in Parliament as well," he said.
Also, it was said that the government will continue to have control of HPCL. "That fundamentally remains. So everything else is only technicality and modality of how do we go through that. So, HPCL will continue to be a listed, board managed CPSE, having separate brand and culture," he said.
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But ONGC, which had to borrow Rs 24,876 crore for the acquisition that helped the government meet its disinvestment target for the 2017-18 fiscal, wanted to be recognised as a promoter of HPCL. After all, no one spends Rs 36,915 crore without getting anything for its shareholders and so it wrote a strongly worded letter to HPCL, warning of regulatory consequences of not recognising the majority shareholder as the promoter.
HPCL, however, has stuck to its guns and has refused to recognise ONGC as its promoter.
When the issue first arose in August 2018, Oil Minister Dharmendra Pradhan had clearly stated that ONGC is the new promoter of HPCL.
ONGC, he had said, had invested in acquiring a majority stake in the company and so it is the promoter. "ONGC is the promoter of HPCL," he had said.
But HPCL refused to acknowledge ONGC as its promoter as evident from its shareholding filing with stock exchanges, the latest being on January 21.
Surana said there is a distinction between ownership and management and ownership is segregated from shareholding. "Shareholders are not owners of assets of the company," he said.
"As far as promoter issue is concerned, it has never been in doubt that the Government of India will continue to be the promoter of HPCL. The issue was whether ONGC should also be added as co-promoter. We had asked certain clarification and the government has advised that the Government of India is the promoter of HPCL and ONGC can also be added as a promoter of HPCL. But to add ONGC as a promoter, there is a certain procedure to be followed and certain clarification required. We have asked for clarifications on those," he said.
Without elaborating on the clarifications sought, he said listing rules and Companies Act defines the procedure and certain requirements of who could be called a promoter.
"We have asked certain clarifications. Once we receive clarification, we will do that. We are maintaining status quo till then," he said.
There is a procedure defined to the classification of promoters and HPCL will follow that procedure, he said.
Surana said all appointments on HPCL board are done by the government and ONGC as a promoter has no say in that.
After ONGC bought out government stake, HPCL became its subsidiary. Since ONGC takeover in January 2018, HPCL has made four stock exchange filings about the shareholding pattern of the company -- the first on April 20, 2018, then on July 12, 2018, then on October 19, 2018, and finally on January 21, 2019. In all four, ONGC is shown as the public shareholder and President of India listed as the promoter.
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).
Surana has retained the title of Chairman and Managing Director despite corporate governance structure require a group having just one chairman and subsidiaries being run by managing directors and CEOs.
ONGC's overseas subsidiary, ONGC Videsh Ltd, is headed by a Managing Director and CEO. Its refinery subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), which is listed on BSE, too, is led by a Managing Director and CEO. ONGC Chairman is the head of boards of both the companies.
Since acquiring a majority stake in HPCL, ONGC has only been able to appoint one director to that firm's board.
ONGC has appointed its Director (Finance) Subhash Kumar to HPCL board. He has replaced Sushma Taishete Rath, Joint Secretary in the Ministry of Petroleum and Natural Gas.
Prior to this, HPCL had two government nominee directors -- Rath and Sandeep Poundrik, Joint Secretary (Refineries) of the Oil Ministry. After the appointment of Kumar, there remains only one government nominee director on HPCL board.
