“The acquisition of 51.11 per cent government stake in HPCL will be funded through a combination of market borrowing and selling some stake in IOC and GAIL,” a source privy to the development said. Selling stake in the open market may create volatility and so, ONGC is considering selling less than 2 per cent stake in IOC to institutional investors like LIC in block deal, he added. ONGC has already secured shareholder nod to raise up to Rs 25,000 crore debt, he said, adding that the company had about Rs 10,000 crore of cash in hand. “It will be a combination of stake sale and borrowing to fund the acquisition,” the source said.

The deal, he said, is likely to conclude by December. The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted ‘in-principle’ approval to the strategic sale of the government’s existing 51.11 per cent stake in HPCL to ONGC “along with the transfer of management control, which will result in HPCL becoming a subsidiary company of ONGC.”

But since the offer meant a transfer of management control from the government to ONGC, there was apprehension

that it would trigger Sebi’s takeover code and compel ONGC to make an open offer to acquire an additional 26 per cent stake from minority shareholders, he said.

So, the terms of sale have been amended to state that “HPCL will continue to be a government company in terms of

section 2(45) of the Companies Act, 2013, and will continue to be controlled by the Government of India through ONGC under the administrative control of the Ministry of Petroleum and Natural Gas”. This helped avoid making an open offer.