Following the ONGC–HPCL deal, a contrary trade was observed in the shares of ONGC and HPCL in the early session on Monday. The stock of state-owned ONGC jumped over 6% while the shares of oil refining major HPCL shed 4%. ONGC Board on 19 January 2018 considered the proposal and approved the acquisition of the entire 51.11% shareholding which accounts to 77.88 crore equity shares of the President of India, at a cash purchase consideration of Rs 473.97 per share with a total acquisition cost of Rs 36,915 Crore, ONGC said. The parties expect to complete the transaction before the end of January 2018, ONGC added. Also, top brokerages were saying that ONGC is slated to benefit from the deal. SBI Capital Markets Ltd. and Citi Global acted as the transaction advisors and Shardul Amarchand Mangaldas acted as the legal advisor to ONGC for the deal.
Following the development, shares of Oil and Natural Gas Corporation Ltd. (ONGC) jumped 6.4% to the day’s high of Rs 206 nearing its 52-week high price of Rs 212 while the stock of Hindustan Petroleum Corporation (HPCL) lost 4.2% to the day’s low of Rs 399.05 on BSE. ONGC will pay Rs 473.97 per share for 77.8 crore shares of the government in Hindustan Petroleum Corp Ltd (HPCL), the company said in a stock exchange filing. ONGC is paying a price which is 14% higher than Friday’s closing price of HPCL and over 10% of the 60-day weighted average of the scrip. Meanwhile, ONGC has increased its first ever debt-raising plans by 40% to as much as Rs 35,000 crore to fund its Rs 36,915-crore acquisition of Hindustan Petroleum (HPCL).
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The acquisition price is at a 13.8% premium to HPCL’s closing share price on Friday. Research and brokerage firm Macquarie said that the deal puts ONGC in a comfortable position, as the firm would see a 9% EPS accretion. The firm has reiterated its outperform rating on the shares. “For HPCL, specifically, the transaction changes little on the ground, with the company retaining its independent identity and only direct ownership changing hands,” pointed out Probal Sen of IDFC Securities in a recent report.
Meanwhile, India’s stock market opened higher on Monday with Sensex and Nifty beginning at fresh record highs amid the optimism over third-quarter earnings. BSE Sensex gained 102.39 points or 0.29% to start at 35,613.97 with the shares of ONGC rising the most among the 31 stocks of the key index while NSE Nifty lost 11.5 points to begin at 10,883.2. Shares of Asian Paints, Axis Bank, Dewan Housing Finance, Havells India, Rallis India, Vakrangee and Justdial will be in close watch ahead of their respective third-quarter earnings later today. Going ahead in a holiday-shortened week ahead, earnings of blue-chip companies such as Axis Bank and Maruti Suzuki as well as derivatives expiry will likely to steer the domestic equities. The benchmark Sensex surged 152.43 points to hit a lifetime peak of 35,664.01 and Nifty ticked up 31.75 points to hit a fresh record high of 10,926.45.