The Indian oil ans gas company Oil and Natural Gas Corporation (ONGC) has agreed to acquire a 51.11% share in the Indian refiner Hindustan Petroleum Corporation Limited (HPCL) for a total amount of INR369bn (US$5.8bn). ONGC will pay a premium of 14% on HPCL's current market price for the stake. Once completed, the acquisition will enable ONGC to acquire a stake in India's third largest state-held refining company, diversify its cash flow and limit its vulnerability to global crude oil prices fluctuations.
ONGC is India's largest crude oil and natural gas producer and contributes to approximately 70% of the domestic production. With the acquisition, it will increase its midstream and downstream presence. The rationale behind the move is to create an Indian integrated oil major giant, both strong in the upstream business (ONGC) and in the refining sector (HPCL). The new giant would be able to rival oil majors such as ExxonMobil or BP and may further consolidate by acquiring smaller Oil India Ltd (OIL).
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