Indian Oil Corporation is holding talks with stakeholders on the merger of its subsidiary Chennai Petroleum Corporation Ltd, as standalone projects are not viable under prevailing market conditions, a top company official said. IOC has been mulling the merger of CPCL with it, over the last few years. “Essentially, any standalone project is not viable in current market conditions. Because our business is highly volatile. The volatility affecting any of these standalone refiners in much more significant way than those which are integrated (with parent company),” Indian Oil Corporation, Chairman, B Ashok told reporters here. “It does not make sense for standalone businesses now in the current context of very high volatility.. We believe a merger of a subsidiary with parent organisation will always be beneficial,” he said.
Elaborating, he said CPCL incurs more taxation if it is a standalone entity.”We think overall we can optimise a lot, in case of merger (with IOCL),” he said. Currently, IndianOil Corporation holds 51.9 per cent stake in Chennai Petroleum Corporation, while Naftiran Intertrade, the subsidiary of National Iranian Oil company has 15.4 per cent remaining with other financial institutions.”Mergers are also dependedent on various stake holders.. There are also outside stakeholders in CPCL.. We are also in discussions with them (for merger of CPCL).. They are also part of board,” Ashok said. However, he clarified he cannot give any “timeframe” on when the merger would take shape. “We have certainly conveyed various options to the stakeholders”, he said.
Asked on the proposal to go for merger, when CPCL has been posting healthy financials, he clarified that one has to look at the “long term sustainable model.” “As I said earlier, we are in a very volatile business.. This is a subsidiary of Indian Oil.. Merger will enable us to optimise.. One needs to work on the long term sustainable model,” he said.