ONGC board approves taking 60% mrpl stake

Refusing to say anything on the price ONGC was paying to A. V. Birla group and additional equity it plans to put in to make the high debt refinery commercially viable, Raha said “I can only say that the package is very attractive.”

As part of the deal, financial institutions would convert part of their Rs 5,500 crore debt into equity, which would bring down shareholding of state-run refinery Hindustan Petroleum Corporation ltd (HPCL) to 15-16 per cent. HPCL currently has equal 37.39 per cent in mrpl while the remaining is with financial institutions and public.

Sources said ONGC would be buying 37.39 per cent equity holding of A. V. Birla group for about Rs 60 crore. Besides, the additional equity infusion and financial restructuring would give ONGC a controlling 60 per cent stake in the 9 million tonnes state-of-the-art refinery. Sources said ONGC, after completing the acquisition formalities in the next couple of weeks, was likely to merge mrpl with itself to get tax benefits. The state-run exploration firm would be able to set of its tax liability against Rs 2,800 crore accumulated losses of mrpl. ONGC, with profits of over Rs 5,100 crore, is one of the largest corporate tax payers in the country.

Sources said financial restructuring would be necessary to bring down high 6:1 debt-equity ratio and turnaround the loss making refinery.

Fis have worked out a package under which about Rs 400 crore of rupee loan would be converted into equity, interest on existing foreign currency and rupee loans will be slashed and the commission on the deferred payment guarantee extended by the term lenders would be lowered, they said.

A. V. Birla group wants to exit the 9 million tonne per annum joint venture refinery with state-run refining and marketing company HPCL as it has been incurring heavy losses for the past couple of years.