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ONGC board okays MRPL stake buy

BS Energy Editor in New Delhi

The board of directors of Oil and Natural Gas Corporation is learnt to have given consent for the acquisition of the Aditya Birla group's stake in the joint venture Mangalore Refinery and Petrochemicals Ltd.

"We should be finalising the deal shortly," ONGC chairman and managing director Subir Raha told Business Standard on Wednesday. However, a senior ONGC official said it was a matter of days before the deal would be finalised. ONGC was recently given the right to sell petrol and diesel on the condition that it had a reliable source of supply. The acquisition of the stake in MRPL would ensure that supply source.

The board of Hindustan Petroleum Corporation , the joint venture partner in the refinery, has ratified the proposal to have ONGC as a joint venture partner in place of the Aditya Birla group.

It is learnt that ONGC will buy the Aditya Birla group's 37.39 per cent stake in MRPL for about Rs 2-2.50 per share and then infuse under Rs 10 billion additional capital for the majority stake and management control of the loss-making refinery.

This will result in ONGC having close to a 60 per cent stake in MRPL, while HPCL's stake will come down from 37.39 per cent to 15-16 per cent. Sources said a financial restructuring of MRPL would be necessary to bring down the high 6:1 debt-equity ratio and turn around the loss making refinery.

The Aditya Birla group wants to exit the 9 million tonne per annum refinery because it has been incurring heavy losses for the past couple of years.

AV Birla group to incur Rs 4-billion loss

The book value of the investments in MRPL is around Rs 4.72 billion, while the price of Rs 2.10 a share that ONGC is willing to pay would mean the group will get only Rs 624 million, leading to a hit of Rs 4.09 billion.

Even at the Rs 2.30 a share the Birlas had asked for, the hit would be Rs 4.03 million.

Group flagship Grasim Industries, by virtue of its 19 per cent stake, would take the maximum hit of around Rs 2.07 billion, while Hindalco, which holds a 12.1 per cent stake will have to take a hit of Rs 1.32 billion.

Indian Rayon, which has 5.2 per cent in MRPL, will see the value of its holdings diminish by Rs 565 million, and Indo Gulf, which has another 1.3 per cent, will also take a hit of Rs 139 million.

But with Indo Gulf's investments being transferred to Hindalco, the metals major will see a depreciation of Rs 1.57 billion in its investments.

The Birlas' have been on the lookout for a buyer for their stake in MRPL for a few years now. The company was previously in talks with its joint venture partner Hindustan Petroleum Corporation to sell its stake, but the two partners couldn't reach an agreement on the price.

Eventually, ONGC entered the scene with a proposal to buy the Birlas out, with a promise to infuse the much needed capital in MRPL to improve its debt:equity and bring in additional working capital funds.

MRPL Q1 losses rise to Rs 1.17 billion

Mangalore Refinery & Petrochemicals' net losses during the first quarter of fiscal 2002-03 have gone up to Rs 1.17 billion from Rs 1.15 billion during the same quarter of last fiscal. This was despite a 87 per cent increase in turnover at Rs 20.34 billion (Rs 14.57 billion).

Hindalco approves MRPL stake sale

The board of aluminium maker Hindalco Industries has approved the sale of its 12.04 per cent stake in MRPL to state-run ONGC, the Bombay Stock Exchange said on Thursday.

(With additional inputs from V Phani Kumar in New Delhi)

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