“India Considers ONGC Rights Issue to Fund HPCL’s Green Projects Amid Clean Energy Drive”


India intends to urge Oil and Natural Gas Corp (ONGC) to consider a rights issue to support green initiatives at Hindustan Petroleum Corp (HPCL). This move aligns with the government’s $3.6 billion equity plan to aid state oil refiners in transitioning to cleaner energy.

"India Considers ONGC Rights Issue to Fund HPCL's Green Projects Amid Clean Energy Drive"

"India Considers ONGC Rights Issue to Fund HPCL's Green Projects Amid Clean Energy Drive"

The Indian government is strategizing to prompt Oil and Natural Gas Corp (ONGC), a state-run entity, to contemplate launching a rights issue aimed at financing eco-friendly projects at Hindustan Petroleum Corp (HPCL), reveal two insider sources. This initiative, estimated to generate approximately $1.9 billion, is a response to India’s finance minister’s pledge earlier this year, committing 300 billion rupees ($3.6 billion) in equity to assist major state oil refiners in transitioning toward sustainable energy.

Citing direct knowledge of the matter, the sources disclosed that government deliberations involve evaluating various alternatives for HPCL, including potential direct loans at preferential rates. However, as the discussions remain confidential, the sources opted for anonymity, lacking authorization to engage with the media.

One of the sources emphasized that the oil ministry awaits a response from the finance ministry regarding the proposed rights issue by ONGC. Calculations based on preceding rights issues of other state refiners suggest that an ONGC issuance could potentially yield around 155 billion Indian rupees ($1.86 billion), according to Reuters estimations.

In 2018, New Delhi divested its complete 51.1% stake in HPCL to ONGC, transforming the corporation into a subsidiary of India’s premier energy explorer. Presently, the government retains a 58.93% stake in ONGC.

Initially considering the infusion of funds into HPCL through preferential share allocation, officials grew concerned that this approach might reduce ONGC’s stake below the pivotal 50%, thus relinquishing the government’s indirect control over HPCL, clarified one source.

ONGC, HPCL, and the concerned ministries have not yet responded to media requests for comments.

India’s additional major state refiners, Indian Oil Corp and Bharat Petroleum Corp, have announced their intentions to launch respective rights issues amounting to 220 billion and 180 billion rupees. The government holds a 51.5% stake in IOC and a 52.98% share in BPCL.

However, the absence of a clear government directive on fund infusion strategies for HPCL has delayed the anticipated launch of rights issues for IOC and BPCL, as insiders have revealed. Initially slated for late October, the launch of these issues is currently stalled pending further clarity.

Collectively, the three refiners aspire to invest between 3.5 trillion to 4 trillion rupees toward achieving a net-zero emissions target by 2040, signaling a concerted effort to transition to more environmentally sustainable practices.

Sources By Agencies

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