ONGC's HPCL acquisition finally shows signs of life

30 Jan 2024 , 02:29 AM

After six years, the state-run Oil & Natural Gas Corporation’s investment in the downstream refiner Hindustan Petroleum Corporation Ltd. (HPCL) is now profitable.

HPCL’s shares reached a 52-week high of ₹ 475.75 on Tuesday, and they have already increased by 20% in January.

After almost five years, the recent increase has turned ONGC’s investment worthwhile.

On January 31, 2018, the government paid ₹ 36,912 crore to ONGC to buy a 51% share in HPCL. At ₹ 473.97 per share, it had purchased the stake.

The closing price of HPCL’s shares on January 31, 2018, was ₹ 397.12. In September 2017, the price it was at that time was ₹ 473.

With Tuesday’s spike, HPCL’s stock has at last surpassed ONGC’s buy price. ONGC’s 54.9% ownership in HPCL is worth at ₹ 37,088 crore as of Tuesday’s peak.

ONGC’s stock increased by 8% on Monday, bringing it closer to its all-time high of ₹ 314.67, which it previously attained in 2014. January had a 27% increase in the stock, marking the biggest month since May 2009.

When HPCL revealed its September quarter results and that it was increasing refining capacity by 7 MTPA at Vizag and 9 MTPA to commission the Barmer refinery, the company’s shares shot up in mid-November. The Mumbai refinery’s capacity was increased from 7.5 MTPA to 9.5 MTPA already. At Chhara, HPCL also put into service a 5 MT regasification and storage terminal.

Over the next five years, the company also intends to invest ₹ 75,000 crore, of which 25–30% will go toward the renewables industry, 20–25% on refining, and the remaining portion toward marketing.

November saw a 40% increase in shares, followed by 15% in December and 20% more this month.

At ₹ 478, HPCL’s shares are currently 5.7% higher than those of ONGC, which are up 3.6% to ₹ 261.65.

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