State-owned oil marketer HPCL is planning to invest Rs 61,000 crore over the next five years to scale up its business operations to tap the huge energy demand in the country. In the last one year, the company’s shares have spiked over 70 per cent amid the talks of its merger with exploration giant Oil and Natural Gas Corp (ONGC).
The company will invest more Rs 7,110 crore in the current fiscal, which is 11 per cent of the total planned capex of Rs 61,000 crore in five years ending 2022. The company’s capex stood at Rs 5,860 crore in the last fiscal.
“With a huge potential of growth amidst rising energy demand and due to low per capita consumption base, the oil and gas sector is poised for an exciting and challenging future,” HPCL chairman and managing director M K Surana said post the company’s annual general meeting.
“We are adapting to this changing energy mix and are well positioned to create value for all the stakeholders in the future with a capex of over Rs 61,000 crore over the next five years,” he added.
HPCL’s merger with ONGC
The government had approved the sale 51 per cent equity stake in HPCL to ONGC on July 19. Union Finance Minister Arun Jaitley is heading the three-member ministerial panel to oversee and expedite the sale of the government stake in oil refiner HPCL to explorer ONGC for around Rs 35,000 crore. The government seems to have opted for acquisition route for combining the two companies, making HPCL a subsidiary of ONGC rather than merging the two. HPCL will retain its brand post-merger.
However, minority shareholders in HPCL may not gain or lose much from the deal, apart from the gain or loss in the share prices, as the deal will be exempt from the mandatory open offer required in cases of acquisition of more than 26 per cent equity stake.
MRPL to go with HPCL?
MRPL is a subsidiary of ONGC and HPCL, in which the latter owns 17 per cent. According to Surana, any discussion on the fate of MRPL has not been taken yet, but it is likely that the subsidiary company will “along with HPCL”. Experts have earlier pointed out that since MRPL and HPCL are essentially in the same business, it doesn’t make sense for ONGC to keep two separate companies under its fold.
HPCL owns and operates two major refineries producing a wide variety of petroleum fuels and specialities, one in Mumbai (West Coast) of 7.5 million tonnes per annum (MMTPA) capacity and the other in Visakhapatnam (East Coast) with a capacity of 8.3 MMTPA.