State-run Hindustan Petroleum Corporation Ltd (HPCL) is poised to merge Prize Petroleum Co Ltd (PPCL) with itself after attempts to woo buyers for a 50% stake in its oil exploration firm did not yield favourable response.
HPCL, which holds 50% equity in Prize, said its board would take a final decision on March 25. Of the remaining stake, ICICI Bank holds 35%, ICICI Ventures 10% and HDFC Bank 5%.
"We are looking to partner with global companies like Exxon and Chevron, and frankly, companies that have expressed interest in working with us are not of that stature. We want to achieve the kind of synergy that RIL has with BP," HPCL refineries director K Murali said.
Last November, PPCL had invited bids for the stakes held by the financial institutions as they wanted to exit the firm in order to limit their exposure to the high-risk exploration business. Following this, HPCL had started scouting for a partner that could bring in technological expertise as well as funds. Murali said the plan was to issue fresh shares to the partner.
"We have been looking for a company that is financially stable, has a proven success ratio, has an established record of not violating laws in foreign countries and is also a cultural fit with Prize, but so far we have been unable to find one," he said.Senior HPCL officials also told ET that another reason for the merger was the opinion amongst the senior management that it was counter productive to have two separate companies working in the same field.
"The possibility of a merger cannot be ruled out and we will take a final decision on March 25, when the representatives of PPCL will meet the HPCL board," HPCL finance director B Mukherjee said.
"I cannot comment on the issue right now and will make a detailed presentation to the HPCL board on March 25," PPCL managing director M R Pasrija said.
Around two years back, PPCL had reportedly approached steel tycoon Lakshmi Mittal, Essar Oil, Larsen & Toubro and Jaiprakash Associates for a possible stake sale, but discussion had not yielded results. PPCL currently has only one service contract from Oil and Natural Gas Corporation in the Cambay Basin Offshore fields.
HPCL, in consortium with other E&P partners, has 19 blocks in India, one block in Australia and two blocks in Egypt. It plans to invest around 2,250 crore in the upstream sector during the Eleventh Five-Year Plan.