State-owned Oil and Natural Gas Corp (ONGC) and Hindustan Petroleum Corp Ltd (HPCL) may sell a part of their stake in Mangalore Refinery and Petrochemicals Ltd (MRPL) to comply with regulations on minimum public holding.
Public shareholding in the Mangalore-based refiner is currently just 11.42 per cent, not even half of the mandatory 25 per cent public float required by the Securities and Exchange Board of India (SEBI) for listed companies.
PSUs have been asked by SEBI to comply with the public shareholding requirement by August next year.
The Board of MRPL will meet on August 1 for approval options to raise public shareholding up to 25 per cent as per SEBI directive, a senior official said.
The options before the board is either the promoters divest a part of their shareholding through an offer for sale (OFS) or MRPL issues fresh shares through a public offer, he said.
ONGC currently holds 71.63 per cent stake in MRPL while HPCL has 16.96 per cent. As much as 23.2 crore shares will have to be sold through on OFS if the two promoters were to sell part of their stake.
The offer size will be much larger if the company decides to go for an OFS by issuing fresh shares, he said.
Even in case of fresh shares, shareholding of the two promoters, who currently between them hold 88.58 per cent of MRPL, will come down.
ONGC had in 2003 bought Aditya Birla Group's 37.4 per cent stake in MRPL for Rs 59.43 crore at Rs 2 a share and infused additional Rs 600 crore capital. The buyout and additional capital infusion raised its stake to 51 per cent.
Originally, HPCL and Aditya Birla Group were equal partners in MRPL with 37.4 per cent stake each; the remaining 25.2 per cent was with the public. Post ONGC-sponsored restructuring of the then loss-making MRPL, HPCL's stake fell to 16.9 per cent.
Lenders to MRPL also agreed to the Debt Restructuring Package (DRP) proposed by ONGC, which included conversion up to Rs 365 crore of their loans into equity. This led to lenders holding about 20.8 per cent in MRPL while public holding came down to 11.3 per cent.
Subsequently, ONGC acquired equity allotted to the lenders pursuant to DRP raising its holding in MRPL to 71.62 per cent.
The official said MRPL board on August 1 will also consider raising up to Rs 3,000 crore as part of capex plans through issuance of non-convertible debentures or bonds.
MRPL was set up in 1988 with the initial processing capacity of 3 million tonnes. Under ONGC, its capacity has risen to 15 million tonnes per annum.
"We seek opportunities to strengthen our central public
sector enterprises through consolidation, mergers and acquisitions," Jaitley had told the Lok Sabha on February 1 while presenting the Budget for the year beginning April 1.
"It will give them the capacity to bear high risk, avail economies of scale, take higher investment decision and create more value for stakeholders."
Aiyar had first mooted merger of HPCL and BPCL with ONGC and OIL with IOC to create two oil giants having interests across the energy chain in 2004.
However, in September 2015, a high-level panel on recast of public sector oil firms did not favour mergers to create behemoths and instead suggested greater autonomy by transferring government shareholding in oil PSUs to a professionally-managed trust.
The Advisory Committee on Synergy in Energy headed by V Krishnamurthy was of the view that mergers and consolidations worldwide occurred during times of low oil prices and were instruments of eliminating excess workforce and duplicate facilities.
That was the time when oil price was on the rise, but it has in the past two years slumped to multi-year lows.
Aiyar was also keen on subsidiaries of oil PSUs to be merged with the parent firm - like merger of Kochi refinery with BPCL and Chennai refinery with IOC.
ONGC is India's biggest oil and gas producer and the highest profit making company. Indian Oil Corp (IOC) is the country's biggest refiner while GAIL is India's largest gas pipeline operator.
