Government To Engage Two Advisors To Manage Sale Of HPCL to ONGC

Government To Engage Two Advisors To Manage Sale Of HPCL to ONGC

The government has sought to engage two advisors to help manage the sale of its stake in Hindustan Petroleum (HPCL) to Oil and Natural Gas Corp (ONGC).

The Department of Investment & Public Asset Management (DIPAM) has invited bids by August 10 from consulting firms and investment bankers who are expected to, among other things, advise the government on the valuation of HPCL and ‘professionally guide during the negotiation with ONGC,’ according to an advertisement published on DIPAM site.
The Government on Wednesday gave an “in-principle” approval for the strategic sale of its 51.11 per cent shareholding in HPCL to ONGC along with the transfer of management control.

“The Advisors will be required to undertake tasks relating to all aspects of the proposed strategic disinvestment culminating into successful completion of the transaction,” according to the government’s request for proposal.
The advisors will be required to prepare all documents such as Information Memorandum (IM), Confidentiality Agreement, including Transaction Agreements such as Agreement to Sale and Share Purchase Agreement.

HPCL shares are down 4.5 per cent, and ONGC up 1 per cent since the Cabinet gave its nod for the share sale. HPCL shares had sharply run up in the weeks before the Cabinet decision on speculation that an open offer might be on way. But a growing realisation that ONGC will probably be exempted from making an open offer has pulled down HPCL shares.

There is no clarity as of now on the price at which ONGC will have to purchase the government stake. But, according to sources, ONGC’S refining unit, MRPL, and Petrochemicals unit, OPAL, will likely get merged with HPCL. This, however, will happen only after ONGC takes over HPCL, although a plan for this may be announced soon.
At current prices, the government stake in HPCL would cost about Rs 28,500 crore.

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