India's oil ministry plans to merge MRPL with HPCL

25 May 2023 CW Team

The idea of merging MRPL and HPCL was first floated five years ago, after ONGC acquired HPCL from the government. However, the plan made little progress until now. The ministry is now pushing for the merger, which is likely to be a share swap deal.

Under the proposed deal, HPCL would issue fresh shares to MRPL shareholders in exchange for their shares. There would be no cash outlay involved.

HPCL and ONGC are the promoters of MRPL. ONGC holds a 71.63% stake in MRPL, followed by HPCL at 16.96%, with the remaining 11.42% held by the public. The merger would significantly increase ONGC's stake in HPCL, from the current 54.9%.

The oil ministry is likely to seek cabinet approval for the merger proposal. The oil ministry, ONGC, HPCL and MRPL have all declined to comment on the matter.

The merger could take place as early as next year, but it could be delayed if the government decides to wait for the two-year cooling-off period between two successive mergers to expire. MRPL completed the merger of its subsidiary OMPL with itself last year.

The merger is aimed at consolidating most of ONGC's downstream assets under HPCL. This would likely lead to some tax gains, as HPCL, which has a vast retail network, sells much more fuel than it produces at its refineries. After the merger, it would have in-house access to MRPL's products. MRPL, on the other hand, doesn't have much of a domestic sales network and sells a substantial proportion of its products to retailers outside Karnataka, attracting central sales tax (CST). A merger could help cut CST outgo for MRPL.

However, the merger could also be a cause for concern among MRPL employees, as they could be transferred to other refineries of HPCL.

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The Indian government's oil ministry is drawing up a proposal to merge Mangalore Refinery and Petrochemicals (MRPL) into Hindustan Petroleum Corporation (HPCL), two listed subsidiaries of Oil and Natural Gas Corporation (ONGC). The idea of merging MRPL and HPCL was first floated five years ago, after ONGC acquired HPCL from the government. However, the plan made little progress until now. The ministry is now pushing for the merger, which is likely to be a share swap deal. Under the proposed deal, HPCL would issue fresh shares to MRPL shareholders in exchange for their shares. There would be no cash outlay involved. HPCL and ONGC are the promoters of MRPL. ONGC holds a 71.63% stake in MRPL, followed by HPCL at 16.96%, with the remaining 11.42% held by the public. The merger would significantly increase ONGC's stake in HPCL, from the current 54.9%. The oil ministry is likely to seek cabinet approval for the merger proposal. The oil ministry, ONGC, HPCL and MRPL have all declined to comment on the matter. The merger could take place as early as next year, but it could be delayed if the government decides to wait for the two-year cooling-off period between two successive mergers to expire. MRPL completed the merger of its subsidiary OMPL with itself last year. The merger is aimed at consolidating most of ONGC's downstream assets under HPCL. This would likely lead to some tax gains, as HPCL, which has a vast retail network, sells much more fuel than it produces at its refineries. After the merger, it would have in-house access to MRPL's products. MRPL, on the other hand, doesn't have much of a domestic sales network and sells a substantial proportion of its products to retailers outside Karnataka, attracting central sales tax (CST). A merger could help cut CST outgo for MRPL. However, the merger could also be a cause for concern among MRPL employees, as they could be transferred to other refineries of HPCL. Also Read Dwarka Expressway to be completed by April 2024 MPMRCL invites tender for Bhopal metro underground construction

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