ONGC repays a third of loan taken to acquire HPCL

ONGC will not sell its stake in Indian Oil Corporation (IOC) and GAIL India Ltd. in the near future as it has used internal resources to repay close to a third of the Rs. 24,881-crore loan it had taken to buy Hindustan Petroleum Corp Ltd. (HPCL), according to reports in a leading financial newspaper. ONGC had in January received government approval to sell its 13.77% stake in IOC and 4.86% state in GAIL to help fund the Rs. 36,915-crore acquisition of HPCL.

“We are generating enough resources internally thanks to a rebound in oil prices. We used these to bring down the borrowing for HPCL acquisition to Rs. 20,000-21,000-crore in the first quarter and are repaying another Rs. 3,000-4,000-crore in current quarter.

Effectively, we have repaid Rs. 7,800-crore,” an un-named official was quoted as saying in the report. ONGC had borrowed Rs. 24,881-crore on a short-term loan to fund buying the government’s 51.11% stake in HPCL. The remaining came from its cash reserves. The official said the pace of repayment may slow down in the third and fourth quarters owing to outgo on taxes and dividend, as also the fact that capital spending would peak by then. Initially, ONGC considered selling IOC and GAIL stake to fund the acquisition, but it has never found the right price to offload the shares, he said. The short-term loan it availed had a provision to pre-pay without any penalty.