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ONGC receives government approval for a ₹18,365 crore investment in OPaL, converting debt and increasing equity stake to 95.69%. The strategic move secures feedstock and strengthens ONGC's position in the petrochemical sector.
The central government has granted Oil and Natural Gas Corporation Limited (ONGC) the green light to make a significant investment in ONGC Petro Additions Limited (OPaL), as revealed in a recent exchange filing by the company. As a result, ONGC’s share price will remain in focus today.
ONGC will inject an additional ₹10,501 crore into OPaL, strengthening the company's financial foundation. The approval letter, dated August 9, 2024, from the Ministry of Petroleum & Natural Gas, signifies the government's support for this substantial equity investment.
The government has also sanctioned the conversion of back-stopped Compulsorily Convertible Debentures (CCDs) valued at ₹7,778 crore, along with a balance payment of ₹86 crore related to share warrants.
This conversion elevates ONGC's total investment in OPaL to ₹18,365 crore, effectively increasing its equity stake to a commanding 95.69%. This move transitions OPaL into a subsidiary of ONGC, solidifying the latter's dominant position in the petrochemical sector.
In addition to the financial infusion, the government has authorised the allocation of 50% of ONGC's annual gas production from new wells or well interventions in its nomination fields, or up to 3.2 MMSCMD of domestic natural gas, whichever is lower, to OPaL.
This allocation ensures that OPaL has access to essential feedstock, with pricing set at 20% above the Administered Price Mechanism (APM) price. The APM price is calculated as 10% of the Indian crude basket price per barrel, providing OPaL with a stable and competitive pricing structure for its operations.
This strategic investment not only strengthens ONGC's foothold in the petrochemical industry but also provides a clear roadmap for OPaL's future growth. The infusion of capital and conversion of debt will enable OPaL to enhance its operational capabilities, contributing to the overall expansion of the petrochemical sector in India.
ONGC's share price closed almost flat at ₹332.75 on Friday, with a slight gain of 0.06%. However, the stock has seen a remarkable 86.94% increase over the past 12 months, reflecting investor confidence in the company's long-term growth prospects.
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