Oil and Natural Gas Corporation, which last week bought out 20.9 per cent stake held by banks and FIs in its subsidiary Mangalore Refinery and Petrochemicals Ltd, is now eyeing Hindustan Petroleum Corporation Limited's 16.97 per cent stake in MRPL, before making an open offer to buy out the public holding.

"ONGC's acquisition of Aditya Birla Group stake in MRPL made it the only refinery in India operating on equity crude. MRPL is on the turnaround path and for every dollar invested in the company, 22 cents go to somebody else," ONGC chairman and managing director Subir Raha told a press conference in New Delhi on Monday.

Raha indicated that ONGC was keen to buy out HPCL's stake in MRPL, but said taking that decision rested with the government.

HPCL is on the privatisation block; government's 34.01 per cent stake in HPCL is being sold to a strategic partner along with management control.

While the petroleum ministry was in agreement with ONGC's plan to acquire HPCL stake in MRPL, the approval of the disinvestment ministry, which has initiated the privatisation is awaited.

ONGC, which acquired the Aditya Birla Group stake at Rs 2 per share and infused additional Rs 600 crore capital, acquired 20.9 per cent shareholding of banks and FIs at par value of Rs 10. ONGC now has 72 per cent holding in MRPL.

Senior company officials said ONGC has concluded negotiations with HPCL for buying out its stake after which it plans to make an open offer to acquire the remaining 11 per cent public stake.

"Ultimately, MRPL would be merged with ONGC to avail of tax benefits," they said.

After ONGC acquired the Aditya Birla Group's 37.4 per cent equity in MRPL for Rs 59.43, debt restructuring involving lenders converting part of their debt into equity and the state exploration firm infusing additional capital was carried out.

The DRP (debt recast), which included cutting interest rate, pre-payment of part debt and rescheduling repayment of remaining, brought down debt-equity ratio from 15.02:1 to 2.83:1. After the exercise, ONGC had 51.25 per cent stake in MRPL, while joint venture partner HPCL's stake came down from 37.4 to 16.97 per cent.

"As per the DRP, ONGC had an option to buy back equity from lenders within 5 years at a price of par value of Rs 10 per share compounded annually at 10.1 per cent per annum," sources said.

In MRPL, Canara Bank held 1.09 per cent stake, Bank of India 1.28 per cent, Bank of Baroda 1.83, State Bank of India 2.56 per cent, IDBI 4.34 per cent and ICICI 4 per cent stake.

Sources said ONGC, which had extended MRPL a short term need based working capital loan of Rs 450 for a period of one year at 10.75 per cent per annum interest rate, has decided to revise the interest rate to 8 per cent.

The loan enabled MRPL to clear all its overdues to the financial institutions, banks, Indian Oil and HPCL.

MRPL, which posted a net loss of Rs 412 crore in 2002-03, had requested lowering of interest rate, they said adding the company has assessed its working capital requirement and there is an estimated peak deficit of Rs 431 crore in December '03.