PSU stocks jump on positive cues from ONGC-HPCL merger

By: | Published: July 20, 2017 12:07 PM

The benchmark index for the central public sector enterprises Nifty CPSE zoomed 1% on Thursday after the Union Cabinet approval of the proposed merger of ONGC and HPCL. The shares of the acquirer ONGC gained nearly 3% to the day’s high of 167.85.

All of the ten shares of Nifty CPSE traded in green in the rally led by Engineers India which rose more than 4% to the day’s high of Rs 164.5. (Image: NSE)

The benchmark index for the central public sector enterprises Nifty CPSE zoomed 1% on Thursday after the Union Cabinet approval of the proposed merger of ONGC and HPCL. All of the ten shares of Nifty CPSE traded in green in the rally led by Engineers India which rose more than 4% to the day’s high of Rs 164.5. The shares of the acquirer ONGC gained nearly 3% to the day’s high of 167.85. HPCL shares fell as much as 5.18% to Rs 363.8, however, it is not a constituent of Nifty CPSE.

Other shares of CPSE index which rose on cues of the mega merger of ONGC and HPCL are Coal India surged 1.49% to Rs 258.5, Container Corporation of India rose 1.12% to Rs 1,192.9, Rural Electrification Corp gained 1.45% to Rs 185, Power Finance Corporation rose 0.76% to Rs 124.4, Indian Oil Corporation gained 0.69% to Rs 377.75, Oil India rose 0.67% to Rs 285.45 while shares of Bharat Electronics and GAIL went up by 0.47% to Rs 174.45 and 0.43% to Rs 381 respectively.

ONGC shares jumped while HPCL shares tumbled in the early morning trade today after the Union Cabinet yesterday approved the proposed acquisition of HPCL by ONGC, but exempted the deal from an open offer, leaving HPCL’s minority shareholders with no potential gains from the mega buyout transaction worth about 29,000 crore.

On the other hand, the exemption from making an open offer to buy up to 20% of HPCL’s equity share from the public was seen as a positive for ONGC, which will not have to shell out extra money on buying additional equity shares beyond the 51.1% controlling stake that it will acquire from the government.

The government’s plan to build a mega oil PSU of global scale got a shot in the arm yesterday with the Union Cabinet clearing the proposed acquisition of HPCL by ONGC. The sale of the 51.1% stake in state-run refining and marketing company HPCL, held by the government, to oil exploration and production firm ONGC could fetch the government about Rs 29,000 crore at current market prices.

However, there was no clarity yet on the price that ONGC will pay for the acquisition. Earlier this month, ET Now had reported that the government is considering asking it to shell out 405-50% premium for HPCL’s equity stake. Later, another news report said that ONGC officials are of the view that no premium is required to be paid since HPCL is openly traded in the market and is already fairly valued.

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