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HPCL finally recognises ONGC as its promoter

ONGC had purchased the government’s entire 51.11% in HPCL for Rs 37,000 crore in early 2018.

ET Bureau|
Updated: Aug 14, 2019, 05.02 PM IST
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For more than a year, HPCL had said it needed more regulatory clarity for recognising ONGC as promoter, without ever giving details on what was really unclear to the management.
NEW DELHI: Hindustan Petroleum Corporation (HPCL) on Tuesday finally recognised its majority owner ONGC as its promoter in public filings, following a harsh directive from the market regulator last week.

The state-owned company had ignored directives from the government as well as the Securities and Exchange Board of India (Sebi), forcing the latter to set a deadline of August 13 and warn of “appropriate action” if it failed. This forced the HPCL management to act quickly.

Sebi had also ordered HPCL’s company secretary to place the letter containing its directives before the board of directors and disseminate the letter to stock exchanges. For more than a year, HPCL had said it needed more regulatory clarity for recognising ONGC as promoter, without ever giving details on what was really unclear to the management.

Several officials of the petroleum and natural gas ministry and ONGC executives believed HPCL’s quest for clarity was only a tactic to delay the inevitable recognition.

ONGC had purchased the government’s entire 51.11% in HPCL for Rs 37,000 crore in early 2018. Following the transaction, HPCL recognised the government as promoter but not ONGC, leading to heartburn at the state-run explorer and trust deficit between the two companies.

It also came in the way of building on the synergy between the two firms, the original aim of the acquisition, and of managements in coordinating their financing plans. The plan to club all refining entities of the ONGC group by merging HPCL with MRPL also made no progress. The friction between the two companies may not necessarily end quickly but resolution of the promoter issue is a first good step, said an ONGC executive.

“The problem would continue as long as we have two positions of chairman in a group,” the executive said on condition of anonymity, explaining that for a smooth relationship between the two companies, the government will have to ensure that HPCL’s board is also headed by ONGC chairman.

The ministry had directed HPCL in January, more than nine months after the acquisition and following multiple representations by ONGC, to recognise its majority shareholder as promoter, along with the President. HPCL didn’t follow the directive, saying it needed more clarity.
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