Govt likely to get a majority stake in HPCL, will infuse capital in fuel retailors
₹30,000 crore of support to state-run oil retailers and keeping all things constant, the government will be left with ₹9,000 crore to 10,000 crore after the rights issues of IOC and BPCL. The amount is expected to be used for HPCL which has a current market capitalization of ₹39,650 crore. The officials said that it will translate into a significant stake depending on the prices of the shares.
The move comes five years after the government decided to sell its entire 51.1% stake in HPCL to Oil and Natural Gas Corporation (ONGC) for ₹36,915 crore. It was part government disinvestment program, but the government still maintained indirect control over HPCL through state-owned ONGC. This indirect control is the reason why all three state-run fuel retailers- IOC, BPCL, and HPCL decided to not burden consumers with an increase in fuel prices due to the Russia-Ukraine war.
The oil companies recorded a combined net loss of ₹21,201.18 crore between April and September 2022. Despite accounting for an unpaid LPG subsidy of ₹22,000 crore over the past two years, they still experienced significant losses during that period. Although oil prices decreased, the freeze on fuel prices remained in place, which helped the retailers partially offset some of their losses.
The capital infusion by the government is for supporting energy transition projects on the face of it, but the real objective is to compensate for the losses incurred, the officials added. Fitch Ratings previously mentioned that the total amount of money being invested in the companies might be more than what was initially allocated in the budget. This increase could happen because other smaller investors may also join in and contribute money during the rights issues.
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