Amid rising fiscal deficit concerns, Finance Minister Arun Jaitley’s plan to collect about Rs 30,000 crore by selling government’s stake in HPCL in this financial year itself might run into trouble, with the oil ministry raising concerns over valuation of the deal and availability of immediate funds with ONGC. While the Finance Ministry is pushing for an early deal to be concluded within the current financial year 2017-18 itself, oil ministry is in favour of waiting for a while to allow ONGC time to raise enough funds, ET Now reported citing unidentified sources.
The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted in-principle approval to the strategic sale of the government’s existing 51.11 per cent stake in HPCL to ONGC. It was estimated that ONGC would have to pay Rs 33,268 crore for buying the government’s 51.11% stake. In wake of lower tax collections and reduced RBI dividend, the government is eyeing to extend its disinvestment target to Rs 1 lakh crore as against FY18 budget target of Rs 72,500 crore.
According to ET Now, the deal values HPCL’s stake at around Rs 30,000 crore. In September-17, PTI reported that ONGC will acquire the government’s 51.11 per cent stake in HPCL through bulk or block deal in November or December. Post merger, HPCL will retain its brand. ONGC has appointed SBI Cap and the Citi Group as its merchant bankers for the deal and Shardul Amarchand Mangaldas as legal advisor to arrive at a valuation for the takeover of the country’s third-largest refining and oil marketing company.
Earlier, PTI had reported a senior official as saying that ONGC will do the due diligence of HPCL’s assets based on the Information Memorandum and publicly available information to arrive at the valuation. “Negotiations between ONGC and the government will follow if the valuation is vastly different from the one the government has arrived at,” said that report.