ONGC May Sell OPal Stake To Fund HPCL Acquisition

State-owned Oil and Natural Gas Corporation (ONGC) may sell its stake in its mega petrochemical project in Gujarat to fund acquisition of Hindustan Petroleum Corp. Ltd. (HPCL), according to a report in the Economic Times newspaper. ONGC had borrowed money from banks to buy government’s 51.11 per cent stake in HPCL for Rs. 36,915-crore.

An unnamed official was quoted as saying that ONGC has traditionally been a debt-free company and would like to return to that status as soon as possible. ONGC could look to monetise assets to pay off the debt, he said.

ONGC holds 13.77 per cent stake in nation’s biggest refiner Indian Oil Corporation (IOC), which at current trading price is worth close to Rs. 26,000-crore. It also holds 4.86 per cent stake in gas utility GAIL India Ltd., which is worth over Rs. 3,600-crore. Since selling all the shares in one go might not be feasible, an alternative could be selling stake in ONGC-Petro Additions Ltd. (OPaL).

OPaL’s 1.1-mn tonnes capacity petrochemical plant at Dahej in Gujarat was commissioned last year and has reached 100 per cent capacity in February.

“We have invested Rs. 30,000-crore in the project and always had plans to sell a minimum of 26 per cent stake in the project to a strategic investor. Now that the plant has come up well and stabilised, this is the time to monetise it,” the official said. He added that several companies including some global giants have evinced interest in taking equity in the project.

The OPaL project was originally conceived in 2006 and has witnessed cost and time overruns. It was initially planned to be built at a cost of Rs. 12,440-crore but ended up with actual investment of Rs. 30,000-crore. ONGC was originally supposed to keep just 26 per cent stake while gas utility GAIL was to take 19 per cent. 5 per cent was to be taken by Gujarat State Petroleum Corp (GSPC) and the remaining was to be sold to a strategic investor. But GAIL ended up paying for only 9 per cent and GSPC for only 0.2 per cent. The remaining cost was borne by ONGC.