Oil PSUs Gain On Buzz Of Merger Proposal

Shares of state-owned oil companies were in focus today after news reports citing sources said that the Cabinet Secretariat has proposed to merge 13 PSU oil companies. 

Upstream oil companies like ONGC and Oil India and downstream companies like HPCL, BPCL, Indian Oil, Mangalore Refinery and Petrochemicals (MRPL), Chennai Petro and Numaligarh Refinery are being considered for the merger, the reports said. 

Shares of ONGC were up 1 per cent while Indian Oil, HPCL and BPCL advanced between 2 per cent and 4 per cent. 

Shares of smaller refiners MRPL and Chennai Petroleum surged 12 per cent and 6 per cent respectively. 

Traders say that if the proposed merger comes through, it would be more beneficial for smaller refiners like MRPL and Chennai Petroleum, which suffer from volatile earnings. 

Shares of oil marketing companies IOC, BPCL and HPCL also got a boost after global brokerage Morgan Stanley reiterated its "overweight" stance on these companies. 

This is not the first time the government is considering a merger of state-owned oil companies which would give them more heft when they bid for overseas assets. 

Nearly a decade earlier, a high-level committee led by V Krishnamurthy was formed to study a revamp in the state-owned oil sector. The committee however did not favour a merger, citing the then prevailing conditions.