Acquisition of government stake in HPCL by ONGC wouldn’t bring much synergy benefits to the two companies but would, instead, result in the weakening of high-performance culture at the target company, Ambit Capital has said in a report. <\/p>\n
“ONGC parentage could mean interference (from ONGC or government), highly probable participation in upstream and, more importantly, dilution of a high-performance culture,” analysts Ritesh Gupta and Gaurav Khandelwal wrote in a note on Tuesday. <\/p>\n
“We believe long-term holders should get concerned as the deal gets closed and HPCL becomes a subsidiary to ONGC, which doesn’t have such a good track record on capital allocation,” the analysts wrote, wondering how HPCL can gain by becoming a unit of ONGC in an era where oil subsidies have vanished and crude prices are unlikely to cross $60\/barrel in a hurry. <\/p>\n
The transaction would most likely happen at close to the current market price, and not at a premium, in the same way as other divestment deals by the government in the past few years have happened, the report said. <\/p>\n
“We believe that the government would not like to show itself in a bad light before ONGC’s minority shareholders,” the analysts wrote. <\/p>\n
“An open offer or substantial premium for HPCL is unlikely by ONGC; during government stake sale, SEBI laws allow avoidance of open offer if ultimate ownership remains the same and premium paid is less than 25 per cent,” they wrote. <\/p>\n
At current prices, the government stake in HPCL would cost ONGC about $4.5 billion and would raise the acquirer’s debt-equity ratio to 0.4 from 0.2 now, according to the report.<\/p>\n","protected":false},"excerpt":{"rendered":"
Acquisition of government stake in HPCL by ONGC wouldn’t bring much synergy benefits to the two companies but would, instead, result in the weakening of high-performance culture at the target company, Ambit Capital has said in a report. “ONGC parentage could mean interference (from ONGC or government), highly probable participation in upstream and, more importantly, dilution of a high-performance culture,” analysts Ritesh Gupta and Gaurav Khandelwal wrote in a note on Tuesday. “We believe long-term holders should get concerned as the deal gets closed and HPCL becomes a subsidiary to ONGC, which doesn’t have such a good track record on […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[133],"tags":[],"class_list":["post-121669","post","type-post","status-publish","format-standard","hentry","category-oil-gas"],"acf":[],"_links":{"self":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/121669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/comments?post=121669"}],"version-history":[{"count":0,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/121669\/revisions"}],"wp:attachment":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/media?parent=121669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/categories?post=121669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/tags?post=121669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}