: Consolidation in public sector oil firms back on table #FinanceIndia #StockMarketNEWS #Business New Delhi: Government may revive plan for further consolidation in the public sector oil companies by

@StockMarketNEWS Tue 19 May, 2020

Posted in: #Business #FinanceIndia #StockMarketNEWS

Consolidation in public sector oil firms back on table #FinanceIndia #StockMarketNEWS #Business
New Delhi: Government may revive plan for further consolidation in the public sector oil companies by allowing mergers between producing, marketing gas transportation and consultancy companies leaving just few large integrated entities in operation.



The expected move is in line with Finance Minister Nirmala Sitharaman’s announcement on Sunday to privatise most non-core public sector enterprises while leaving just one or maximum of four in core strategic sectors and allow private investments in all areas.



So, after 2018 merger of PSU oil refiner and retailer HPCL with upstream major ONGC, sources said, the government may now look at creating another public sector integrated ‘oil behemoth’ by considering merger upstream oil producer Oil India Ltd (OIL) with Indian Oil Corporation (IOC). Moreover, after proposed split of gas transportation company GAIL into two, one of the entities in gas marketing may also be considered for merger with IOC.



Public sector oil refiner IOC has also in the past shown its interest to buyout government equity in Bharat Petroleum Corporation Ltd (BPCL) but PSUs are not allowed to bid for BPCL that is currently tried for strategic sale to the private sector global companies. Sources indicated that IOC’s case for BPCL may also be considered if proposed bidding for BPCL fails to evince requisite interest.



Sources said that oil may be included in strategic sector as it ensures energy security for the country. But there are around 12 oil PSUs ranging from upstream oil producers like ONGC and Oil India to downstream oil refining and fuel marketing firms IOC, BPCL and HPCL to gas transporter GAIL India Ltd and engineering firm Engineers India Ltd. This leaves consolidation through further mergers and strategic sale the only route to restrict the number of PSUs to at least four as the news PSU policy is likely to state.



While consolidation may be looked at once again, care will be taken to ensure that such mergers only happens where there are synergies and mergers does not result in addition to debt burden on companies. ONGC’s acquisition of government’s share in HPCL had pushed the upstream oil major from debt-free status into one where debt levels reached closer to unsustainable levels.



In one of the most expensive buys, ONGC paid Rs 36,915 crore to buy the government’s entire 51. 11 per cent stake in HPCL. But the deal brought down ONG@ &ÈØڙٝ™ÈÈœÈKLÈܛܙHÈÙˆX˜ÚÌKŒNœ›ÛHœÈL
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