Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Energy: Will 'this' happen? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 27, 2004

    Energy: Will 'this' happen?

    Recently, the petroleum ministry mooted the idea of two mega-mergers of oil companies, one involving ONGC while the other, IOC. The idea here was to merge BPCL, HPCL and ONGC on one had and IOC, IBP and OIL India on the other. These mergers, if they were to take place, would result in India's two major companies featuring in the prominent list of global 500 companies. Let us now analyze the various business parameters that would drive these mergers to success.

    Crude oil security: Both HPCL and BPCL are big marketing players with reasonable refining capacity but have little to write home about upstream exploration and development projects. On the other hand, ONGC accounts for nearly 80% of India's crude oil production and is vying for retailing business riding on its standalone refinery, MRPL. The marketing companies would benefit from ONGC's assured supplies. The same applies to IOC, which shall benefit from the marginal (small) fields of OIL.

    Win-Win situation: ONGC and MRPL have been eyeing the retailing market for some time now and have together got an approval to set up nearly 1,600 retail outlets. With the merger, ONGC would have access to over 10,000 well-established outlets spread across the length and breadth of the country. Further, with enhanced refining capacity in terms of HPCL, BPCL and MRPL, it would be able to reduce its dependence on external sources for refining products. On the other hand, IOC would be heading the marketing front without duplication of efforts post the merger of its subsidiary IBP.

    No duplication: Currently, all the oil-marketing companies are vying for exploration blocks within the domestic boundaries of the country as well as abroad. To put things in perspective, BPCL has allocated nearly Rs 20 bn towards exploration blocks while IOC has created a war chest of US$ 2 bn. At the same time, HPCL is active in certain marginal fields through its subsidiary, Prize Petroleum. Also, ONGC, which has rich experience in exploration, is aggressively eyeing external fields through its subsidiary, ONGC Videsh. We believe, in the current scenario, this would lead to the companies competing amongst themselves and resulting in lower benefits. However, the merger would result in concentration of the companies towards its strength rather than un-necessary competition.

    The above factors seem to be bringing in definite benefits to the country in general and the companies in particular. However, given the labour problems and red-tapism, we believe it is still early days for such a merger. However, it would be a step in the right direction as has been proved by global integrated majors such as Exxon Mobil, Royal Dutch/Shell and BP Amoco. The merger would help India move closer towards attaining oil security and at the same time, provide strong competition to private as well as the global majors, who now plan to enter the market, with Shell being the latest to plan setting up of retail outlets.



    Equitymaster requests your view! Post a comment on "Energy: Will 'this' happen?". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Oil India Ltd: A weak quarter (Quarterly Results Update - Detailed)

    Jan 24, 2017

    Oil India Limited announced results for the quarter ended September 2016. The company has reported an 6.5% and 7.8% Year on Year (YoY) decline in sales and net profit respectively during the quarter.

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    Dec 3, 2016

    GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.

    ONGC: Lower Write-offs Support Performance (Quarterly Results Update - Detailed)

    Nov 3, 2016

    ONGC has announced results for the quarter ended September 2016. The company has reported 10.3 % year on year (YoY) decline in sales, while bottom-line grew 6.3% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)