HPCL gains over 6%, while IOC, ONGC fall as brokerages dissect deal dynamics
In the context of mergers and acquisitions (M & A) in the oil and gas space, oil trading companies (WTO) reacted in various ways in the stock markets.
HPCL shares rose more than 6 percent intraday, while ONGC and the IOC fell between 1 and 2.3 percent. Investors were encouraged after prospects HPCL reported discussions on mergers.
In the meantime, they were cautious about the rest because the deal would mean more trouble and pain for both.
Oil Minister Dharmendra Pradhan said on Wednesday that the merger between the two companies will be completed during the current year, CNBC-TV18 quoted quoting agencies as saying.
The PTI news agency said earlier this month that the government was trying to sell 51 percent of HPCL to ONGC to more than Rs 26 billion rupees.
Following the outbreak of the Council of Ministers, the government could move to appoint valuation and transaction advisers, while ONGC may also decide to hire commercial banks to arrive at the assessment of government involvement.
ONGC had a cash reserve of 13,014 crore rupees and will finance the acquisition of government participation in HPLC, will be provided at least Rs 10 billion crores, the source said.
Major global brokers have highlighted the good times in the HPLC warehouse, but said the deal could mean difficult times for the IOC and ONGC. Moneycontrol examines the views of the transaction.
The global financial services firm said that since such an operation could be considered as a transfer between shares between developers, it does not require the approval of minority shareholders and can not trigger a mandatory open offer. However, the minority shareholders of both companies may have something to say in this type of transaction, he added.
Minorities HPCL, according to the report, may be worth an evaluation exercise to determine a fair value for the action and see if a control premium is warranted.
“The likely intention of the government (as reported) to seek the advice of independent evaluators and request the open offer exemption, therefore, may indicate caution on their part because the two issues could be the subject of controversy for minorities,” he said. The Citi report.
On the other hand, he highlighted how ONGC may have to sell its stake to finance the acquisition. He cited media reports stating that significant energy could consider selling a 13.8% stake in the IOC.
“This could make a logical sense for ONGC as the value of its share is equal to 4.1 billion dollars, almost equal to the value of the government’s participation in HPLC 51% ($ 4.3 billion CMP),” said the firm In its report.
Citi added that the evolution of strong trends in fuel consumption and daily fuel prices are positive. “While the first quarter could be affected by inventory losses, we asked investors to look beyond these factors,” he added.
CLSA also cited media reports on the completion of the transaction by the end of the year. In addition, he also emphasized how the ONGC debt could increase in the back of this proposed transaction.
“More importantly, an NGO holding structure would be created implying a possible leakage value of Rs 6.5 / sh (4% of the current price) using a 50% premium at the current HPLC price and assuming that the market Allocates a holding company (that is, 20%), “the company analysts wrote in its report.
Meanwhile, for minority shareholders, he said, since it is a government-to-government transaction, it may not be a specific minority approval.
As for the monetization of its problems, he said that with the ONGC plan to sell the money in the IOC, the government also plans to sell part of its 57 percent of the IOC.
“We are seeing a global offer of $ 6 billion or 20% participation in the IOC in the short and medium term, which can be a huge inertia for the population,” the report added.
In addition, he indicated that the activity could lead to many of those transactions. In the oil space, he said, the IOC could be the next big company that could be invited to acquire the small Oil India.
“If offered as an ONGC it could imply a loss of value for IOCL and it would be negative,” said