After ONGC-HPCL deal, another mega PSU merger on the cards worth Rs 18,200 crore

The successful merger of HPCL into largest oil explorator ONGC has opened the gates for many more disinvestment type PSU mergers for the Indian government. With the latest news being circulated, it has been revealed that the government is now planning to sell a stake of its hydro-power producer NHPC to its other state-owned NTPC, which is the country’s largest electricity generator by capacity. However, Investors have shown mixed emotions over this deal as they boosted NHPC share price but sold NTPC shares heavily. 

Sources told The Financial Express, the talks are at an initial stage and a deal is unlikely to be concluded this fiscal year, although the government plans to complete some formalities before March. 

Reportedly, the government’s stake of 73.67% in NHPC is valued at Rs 182 billion at current market price. 

The sources added, the  discussions point to the government’s plans to consolidate state-run energy companies to give them global size and scale, apart from helping it to boost revenue collections and stick to its budget gap target.

It is believed that, the sale would drive NTPC’s green portfolio as the predominantly coal-burning generator makes a gradual shift away from fossil fuels. 

Following this, share price of NTPC has tumbled by nearly 5% on stock exchanges. However, at around 1440 hours, the company was trading at Rs 150.60 per piece down by 4.23%. 

On the other hand, share price of NHPC has gained by over 4% on BSE, however, currently was trading at Rs 24.60 per piece above 1.86%. 

If the sale gets approved, then this would be second such consolidation after Hindustan Petroleum Corp Limited (HPCL) merging into Oil and Natural Gas Corp (ONGC). 

Recently, ONGC acquired 51.11% stake in HPCL by paying about Rs 36,915 crore to the government, from which about Rs 12,000 crore will be done by cash and remaining by short-term borrowing. In the month of July 2017, the Union Cabinet gave in-principle nod for the sale of government's stake in HPCL to ONGC. 

The above mentioned two deal first the ONGC - HPCL and now the NTPC - NHPC is government’s move to achieve disinvestment target. The government has hiked the disinvestment target by over 10% to Rs 80,000 crore in FY19.