The Hindu Business Line : HPCL may shed 2 pc in MRPL

THE Ministry of Disinvestment (MoD) has recently sought shedding of 2 per cent of Hindustan Petroleum Corporation Ltd's (HPCL) equity in Mangalore Refineries and Petrochemicals Ltd (MRPL) prior to privatisation of the downstream major, HPCL, according to senior MoD officials.

The move is aimed at maximising the proceeds from privatisation of HPCL. The MoD has informally suggested to the Petroleum Ministry that the offloading of equity could be done to the public.

Currently, HPCL holds 37.5 per cent equity in MRPL, which is on the verge of takeover by Oil and Natural Gas Corporation (ONGC). Post takeover and financial restructuring, which is to be effected later this month, HPCL's equity in the company would shrink to 16.9 per cent. Hence, in the privatisation process, the winning bidder would require to make an open offer for acquistion of 20 per cent equity from shareholders of HPCL as well as the shareholders of MRPL.

This is because HPCL's stake in MRPL is over the 15 per- cent mark, above which SEBI guidelines mandate an open offer to the existing shareholders of MRPL for acquisition of 20 per cent equity, according to MoD officials.

The open offer to MRPL shareholders would, however, soften the bid price quoted by the bidder for acquiring strategic control in HPCL, officials reckon. This is because the open offer for MRPL will nibble into the acquisition cost set by bidders of HPCL. Hence, the MoD has sought sale of 2 per cent of HPCL equity in MRPL post-takeover by ONGC to avert the need for an open offer to MRPL shareholders.

As per the draft shareholder's agreement in MRPL (post-takeover by ONGC), the upstream major will have the first right of refusal of HPCL's stake in MRPL in the event of HPCL planning to exit the venture.

There is a clause in the contract which states that in case HPCL's shares are sold for a price higher than that offered to the Birla group within a period of nine months from takeover of the new management, the Birlas will be compensated for the difference in the acquisition price.

The draft agreement will be ratified on February 26 when the sale of equity by the Birla Group will be completed.

Post-acquisition, HPCL's stake will fall to around 17 per cent; lenders will hold 21 per cent and the public holding will reduce to 11 per cent.

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