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Another hurdle to HPCL selloff

New Delhi, Aug. 25: Officers in the state-owned oil companies, banded together under the Oil Sector Officer’s Association (OSOA), have asked the government to put off the privatisation of Hindustan Petroleum Corporation Ltd (HPCL) for at least two years.

Sources in OSOA say the organisation has asked the government to defer privatisation of Hindustan Petroleum for at least two years to allow the company to realise its true potential.

The move to privatise Hindustan Petroleum have hit a roadblock with the government unlikely to go ahead with the due diligence exercise for the oil refiner from September 1. It would prefer to wait till the Supreme Court hears a petition filed by the OSOA challenging the decision to privatise Hindustan Petroleum without Parliament’s approval.

The due diligence of Hindustan Petroleum was to begin this week with Reliance Industries Ltd (RIL) scheduled to begin its scrutiny. Sources at OSOA said that Hindustan Petroleum unions will not allow any bidders to carry out due diligence.

The other bidders for the country’s second largest oil firm are British Petroleum, Kuwait Petroleum, Petronas of Malaysia, the Shell-Saudi Aramco combine and Essar Oil.

The OSOA, which had a long meeting with the government on its demand for putting off the privatisation, has threatened to block the privatisation exercise at HPCL unless the government decision is ratified by Parliament.

“Data room for due diligence by bidders for the government’s 34.01 per cent stake will be ready by next week, by when the Supreme Court will also decide on the petition,” disinvestment ministry officials said.

OSOA sources said they had asked the government to set benchmarks and targets for sales and profits for the next two years. By then, they claimed, the valuation of HPCL would swell to Rs 44,000 crore.

Last year, HPCL doubled its net profit to Rs 1,500 crore, sparking a stock surge that has seen the company valuation increasing from Rs 8,000 crore to Rs 22,000 crore, sources said.

The due diligence process includes scrutiny of company books and inspection of company’s refineries at Mumbai and Visakhapatnam and select marketing terminals.

Hindustan Petroleum was nationalised under an act of Parliament in the early seventies, but the government has maintained that it does not need to seek Parliament’s approval for the selloff — a view that was backed by attorney-general Soli Sorabjee.

Government sources said the officers’ association has been asked to outline their concerns so that they can be incorporated in the shareholders’ agreement.

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