ONGC to go for bridge loan to fund HPCL deal

Business Standard, 4th Oct 2017

Oil and Natural Gas Corporation (ONGC) is likely to take a short-term bridge loan for
about one year to fund the acquisition of the governments stake in Hindustan
Petroleum Corporation (HPCL).

ONGC has already lined up plans to sell its stake in Indian Oil Corporation (IOC) and
GAIL (India) and has also got approvals from shareholders to borrow up to Rs 25,000
crore from the market. We are looking into all options. As we have to look at
favourable market conditions for selling stake in the two companies, we are looking
into the option of a bridge loan or any short-term loan for at least a year, an ONGC
official said.

The Union Cabinet had given its clearance to sell 51.11 per cent government holding
in HPCL to Indias largest explorer ONGC on July 19 to create a global energy giant.
Based on the current market capitalization of HPCL, the acquisition is likely to cost
about Rs 33,000 crore.

The department of investment and public asset management (Dipam) is likely to

finalise the timing of the deal soon. However, in his last press conference as
Chairman and Managing Director of ONGC, D K Sarraf had said the deal was likely to
happen by December. ONGC has already appointed Citi Bank and SBI Caps as
consultants for the deal.

We are looking at various options for funding the deal, including borrowing and
also selling of IOC and GAIL stakes. ONGC currently holds 13.77 per cent stake in IOC
and 4.87 per cent in GAIL. As ONGC, we would like to acquire the stake at market
price without paying any premium, Saraff said.

ONGC had completed its Rs 7,738-crore acquisition of an 80 per cent stake in Gujarat
State Petroleum Corps K G basin gas block last month. It was in December 2016 that
ONGC had agreed to buy the entire 80 per cent interest of GSPC along with
operational rights in Block KG-OSN-2001/3 in the Bay of Bengal for $995.26 million.

After the GSPC payout, the companys cash in hand comes to the tune of Rs 10,000
crore. We also have the option of using this Rs 10,000-crore cash balance and can
borrow from the markets for capex for the current year, said another official. For
FY18, the company has lined up a capital expenditure of Rs 29,968 crore, while it
spent Rs 1,50,091 crore as capex in the past five years.

In its presentation post the annual general meeting, the company said the
advantages of the HPCL deal would include increased presence in midstream and
downstream sectors, synergic utilisation of MRPL, OPaL and OMPL and exposure
across commodity cycles. Ideas were floated regarding the merger of HPCL and
MRPL after the ONGC-HPCL deal. The idea is to delist MRPL from the market and
merge it with HPCL. It is a decision that the managements of both the companies
have to take. But as a parent company, we would support that, Saraff said.