HPCL and MRPL are being considered for merger by the Oil Ministry

In order to combine the two publicly traded subsidiaries of Oil and Natural Gas Corp. (ONGC), Mangalore Refinery and Petrochemicals Ltd. (MRPL), and Hindustan Petroleum Corp. (HPCL), the oil ministry is currently developing a proposal.

Though little headway was made, the notion of the MRPL and HPCL merger was first broached shortly after ONGC purchased HPCL from the government five years ago. According to the aforementioned sources, the merger, which will probably involve a share exchange, is now being pushed by the ministry.

There won’t be any financial outlay, they claimed, and HPCL will probably issue new shares to MRPL owners as part of the merger.

The MRPL’s promoters are HPCL and ONGC. ONGC currently owns 71.63% of MRPL, followed by HPCL at 16.96% and the general public at 11.42%. By substantially increasing ONGC’s stake in HPCL from its present 54.9%, the purchase will decrease the free float.

For the proposed combination of HPCL and MRPL, the oil ministry would probably ask the cabinet for approval. MRPL, ONGC, HPCL, and the oil ministry all declined to comment.

According to someone, the HPCL-MRPL combination may have to wait until next year because the law calls for at least two years to pass between any two mergers a business conducts. The merger between MRPL and its subsidiary, OMPL, was completed last year.

There would probably be some tax gains from the merger plan, which aims to combine the majority of the downstream assets of the ONGC group under HPCL. With its extensive retail network, HPCL sells a lot more petroleum than its refineries can handle. It will have access to MRPL’s products internally following the transaction. Since MRPL doesn’t have a robust domestic sales network and sells a large amount of its goods to merchants outside of Karnataka, CST is applied to such transactions. According to some, a merger might reduce MRPL’s CST expenditure.

Employees at MRPL may be concerned about a merger since they might be transferred to HPCL’s other refineries, according to a person with knowledge of the situation.

The oil ministry had encouraged ONGC to merge HPCL, MRPL, and OMPL in order to integrate the group’s downstream businesses shortly after the latter’s Rs 37,000 crore acquisition of HPCL. However, the relationship between the two businesses had deteriorated since HPCL refused to acknowledge ONGC as its promoter for a year. The merger of OMPL and MRPL was completed as a result of ONGC’s opposition to the concept of giving HPCL control over MRPL. According to the previously referenced individuals, top officials at ONGC and HPCL have changed in the last year, and both businesses are now more receptive to the concept of a merger.