HPCL Continues to Operate Freely Even After the ONGC Merger

Oil Minister Dharmendra Pradhan's assertion notwithstanding, oil refiner Hindustan Petroleum Corp Ltd (HPCL) continues not to recognise ONGC, its majority owner, as its promoter company.

In a filing to stock exchanges on the company's shareholding pattern as of the end of September, HPCL continues to list "President of India" as its promoter with "zero" per cent shareholding.

Oil and Natural Gas Corp (ONGC), which earlier this year bought the government's entire 51.11 per cent stake in HPCL for Rs 36,915 crore, is listed a "public shareholder", owning "77.88 crores" shares or "51.11 per cent" shareholding of the company.

Calls made to HPCL Chairman and Managing Director M K Surana for comments went answered.

ONGC, which had to borrow Rs 24,876 crore for the acquisition that helped the government meet its disinvestment target for the 2017-18 fiscal, had made its displeasure clear about not being recognised as a promoter of HPCL.

In a strongly worded letter to HPCL, it a couple of months back had warned of regulatory consequences of not recognising the majority shareholder as the promoter, sources privy to the development said.

HPCL, however, has stuck to its gun and has refused to recognise ONGC as its promoter.

When the issue first arose in August, Pradhan had clearly stated that ONGC is the new promoter of HPCL.

ONGC, he had said, had invested in acquiring a majority stake in the company and so it is the promoter. "ONGC is the promoter of HPCL," he had said.

Pradhan's comments followed Surana rejecting ONGC's demand for being recognised as the promoter of the company. "Whatever we are doing, whatever we have done and whatever we will be doing will be as per our understanding of the statute and the guidelines and Companies Act and the SEBI guidelines... Beyond that who is interpreting whatever, it is his understanding of the situation. We need not subscribe to that," he said.

After ONGC bought out government stake, HPCL became its subsidiary. Since ONGC takeover in January, HPCL has made three stock exchange filings about the shareholding pattern of the company -- the first on April 20, then on July 12 and finally on October 19. In all three, ONGC is shown as the public shareholder and President of India listed as the promoter.

Sources said ONGC feels the HPCL management is bound to take corrective action to reflect the true picture.

According to the Securities and Exchange Board of India's rules, the entity that owns the controlling stake should be listed as promoter even if it was not the original promoter of the company.

When Indian Oil Corporation (IOC) had bought the government's stake in fuel retailer IBP Co Ltd, it was listed as the latter's promoter in every instance after the deal. The same was the case when IOC acquired a majority stake in Chennai Petroleum Corp Ltd (CPCL).

Surana has retained the title of Chairman and Managing Director despite corporate governance structure require a group having just one chairman and subsidiaries being run by managing directors and CEOs.

ONGC's overseas subsidiary, ONGC Videsh Ltd, is headed by a Managing Director and CEO. Its refinery subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), which is listed on BSE, too is led by a Managing Director and CEO. ONGC Chairman is the head of boards of both the companies.

Since acquiring a majority stake in HPCL, ONGC has only been able to appoint one director to that firm's board.

ONGC has appointed its Director (Finance) Subhash Kumar to HPCL board. He has replaced Sushma Taishete Rath, Joint Secretary in the Ministry of Petroleum and Natural Gas.

Prior to this, HPCL had two government nominee directors -- Rath and Sandeep Poundrik, Joint Secretary (Refineries) of the Oil Ministry. After the appointment of Kumar, there remains only one government nominee director on HPCL board.