ONGC mulls OMPL-MRPL merger

Written by Siddhartha P Saikia | New Delhi | Updated: Jul 14 2014, 07:46am hrs
ONGC is evaluating a proposal to merge ONGC Mangalore Petrochemicals (OMPL) with Mangalore Refinery and Petrochemicals (MRPL).

The PSU firm has appointed consultancy firm Deloitte to come up with a fair valuation of OMPL, sources privy to the development told FE. The petrochemical complex, set up over 442 acre in Mangalore, is expected to be commissioned by August, after a delay of more than a year.

The R5,750 crore-worth petrochemical project is currently promoted by ONGC and MRPL, both of whom hold a total equity of 49%. The PSU firm is in talks with Kuwait Petroleum, Qatar Petroleum and Emirates National Oil Company, among others to sell remaining stake in OMPL.

The suggestion (to merge OMPL with MRPL) has come to ONGC board. Now, after commissioning of the project next month, the valuation would go up than its book value. We would have to see if MRPL would like to buy out the ONGC stake and at what price, said a senior official on the board of ONGC, who did not wish to be named.

MRPL, a refinery firm, is also a subsidiary of ONGC, where the Maharatna company owns 71.63%. Another PSU firm, Hindustan Petroleum Corporation, has 16.96% stake in the refiner. The remaining 11.42% is being held by institutions, FII, DII, non-institutions and bodies corporate.

In case ONGC decides to go-ahead with the proposal, MRPL would have to seek its shareholders nod, said the official. Deloitte is expected to come up with the valuation and its recommendations by next month.

PP Upadhya, managing director of MRPL, told FE that the final decision on whether OMPL has to be merged with MRPL is to be made by the promoter. The proposal is under discussion. It depends on the parent company on how they want to go ahead with the recommendations," he said.

The latest move by ONGC shows it moving away from an earlier plan where the explorer wanted to hold 46% stake in the venture, while MRPL to hold another 3%. It was looking to sell 26% stake to a strategic partner. According to the initial plan, OMPL was to be commissioned in the first quarter of FY14.

The complex is integrated with MRPL refinery in Mangalore. The feed stock for the aromatic complex would be supplied by MRPL refinery situated adjacent to OMPL. The complex will process naphtha received into paraxylene and benzene. Paraxylene is utilised for production of most-highly used PET bottles and polyester fibre.

On the other hand, benzene is used to produce several end-products such as styrene, polystyrene, phenol and nylon. The complex is designed to produce 0.9 million tonnes per annum (mtpa) of paraxylene and 0.3 mtpa of Benzene.