New Delhi: Oil and Natural Gas Corporation (ONGC) shares increased by more than 1% on the BSE on Friday after the government-owned oil exploration company announced plans to inject about Rs 15,000 crore into ONGC Petro-additions (OPaL) as part of a financial restructuring initiative that will see gas utility GAIL pushed out of the petrochemical company.
In an effort to restructure its finances, the state-owned Oil and Natural Gas Corporation (ONGC) would invest Rs. 15,000 crore in ONGC Petro-additions Ltd. According to a report by the news agency PTI, the move will cause the gas utility GAIL to be pushed out of the petrochemical company.
OPaL, which runs a massive petrochemical facility at Dahej in Gujarat, is currently owned by ONGC and has a 49.36% share in it. According to the article, Gujarat State Petrochemical Corp (GSPC) owns the final 1.43 percent, leaving GAIL (India) Ltd with a 49.21% interest.
The ONGC board last Monday authorised the Petchem company’s financial restructuring. A financial restructuring of the Petchem company, which was losing money because of its enormous debt, had previously received board approval from ONGC. In a regulatory filing to the stock exchanges, the refiner stated that ONGC would convert share warrants into equity, buy back debentures, and spend an additional 7,000 crore in equity, giving it a roughly 95% interest.
Additionally, ONGC will “purchase back 7,778 crore worth of compulsory convertible debentures (CCDs).” Financial institutions currently hold the CCDs that OPaL issued with the help of ONGC.
In OPaL’s equity security, ONGC would also invest 7,000 crore, the company announced. According to the application, OPaL would merge with ONGC as a subsidiary after implementation. A total of Rs. 14,864.281 crore was spent on the transaction.
GAIL bought a share in OPaL in 2008, when it was still building the enormous Dahej petrochemical plant. The project, however, ran significantly behind schedule and over budget, forcing GAIL to cap its equity investment at the initial Rs 996.28 crore.
The factory, which was initially estimated to cost Rs 12,440 crore, wasn’t finished until 2017 and ended up costing about Rs 30,000 crore. GAIL and GSPC will collectively hold close to 5% in OPaL.
About Rs 4,400 crore was invested by ONGC in OPaL as equity and warrants, and Contributing up to Rs 5,000 crore in a joint venture is only allowed.