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Various options available to fund HPCL deal: ONGC

New Delhi, Jan 21 (IANS) Oil and gas explorer ONGC on Sunday said that various "options" including internal accruals and short-term borrowing are available to fund its acquisition of HPCL.

"We have various options available with us to fund this deal," Shashi Shanker, Chairman and Managing Director of ONGC, told a press briefing here, a day after the central government entered into an agreement with the oil and gas explorer for strategic sale of its equity share-holding in HPCL.

"There is an option of internal accruals... another option is of short-term borrowing and liquid assets... We will exercise the most beneficial option available with us."

According to Shanker, acquisition of the Central government's 51 per cent stake in HPCL worth over Rs 36,900 crore can also be done through the combination of various options available with ONGC.

"We have internal resources available with us which is around Rs 13,000 crore. We also have large shareholding in IOC (IndianOil) and GAIL and we can also borrow," Shanker said.

He disclosed that the company's board has approved to hike the borrowing limit to Rs 35,000 crore and that ONGC has also received loan offers worth Rs 50,000 crore at attractive rates.

When asked about the possibility of merging HPCL and another group company MRPL, Shanker replied that currently no decision has been taken on it.

Further, he described the acquisition as a "perfect fit" for ONGC as it will protect the oil and gas explorer against the volatility in crude oil prices.

"Whenever crude oil prices go up -- the bottomlines and the toplines -- of companies like ONGC improve and that of refiners like HPCL get impacted," Shanker said when asked about the synergies that the acquisition is expected to bring.

"... And when crude oil prices fall -- then the GRMs (gross refining margins) of refiners -- like HPCL improve and the bottomlines and the toplines of companies like ONGC get impacted. Thus this acquisition is a perfect fit... It will also enhance the value for minority shareholders."

On Saturday, ONGC announced the acquisition which is also expected to help the central government boost state revenue and bridge the fiscal deficit target.

India's fiscal deficit for the first eight months of 2017-18 has reached Rs 6.12 lakh crore or 112 per cent of the full year's target.

Through the single share sale, the Centre would be able to meet half of its disinvestment target of Rs 72,500 crore through a single action taking the total receipts close to Rs 92,000 crore.

The acquisition will make ONGC India's first vertically integrated "oil major" company, having a presence across the entire value chain.

According to an official statement released on Saturday, the integrated entity will have the advantage of having enhanced capacity to bear higher risks, take higher investment decisions and neutralising the impact of volatility of global crude oil prices.

"In this process, ONGC has acquired significant mid-stream and downstream capacity and will attain economies of scale at various levels of operations," the statement said.

--IANS

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