New Delhi: India's second-largest company ONGC had spent Rs 36,915 crore to acquire a majority equity stake in the HPCL. But to get its sole nominee director appointed on the board of the company, ONGC has to toil through the paperwork. For over five months now, Oil and Natural Gas Corporation (ONGC) has had no representative on the board of Hindustan Petroleum Corporation Ltd – a company in which it owns a 51.11 percent stake since January 2018. HPCL, under its new chairman Pushp Kumar Joshi, is however trying to resolve the situation, top officials said.
HPCL for over one-and-a-half years – between January 2018 and August 2019 – did not recognise ONGC as its promoter despite the government selling its entire 51.11 percent stake in the company to the oil explorer.
It relented only after a rap from market regulator SEBI. ONGC got the right to appoint one director who HPCL called 'Government Nominee Director (Representative of ONGC)'.
Officials said since then ONGC appointed one of its directors as the nominee director. Its last nominee director was Alka Mittal, Director (HR) who was appointed to the HPCL board in April 2021.
In January this year, Mittal was given additional charge of chairman and managing director of ONGC after the retirement of the incumbent. And following the past practice of the company that the chairman could only sit on the board of a subsidiary in the capacity as chairman and not as a director, Mittal resigned from the board of HPCL and another director was nominated.
HPCL promptly took note of it. In a stock exchange filing on January 6, 2022, HPCL said: "Alka Mittal has tendered resignation from the position of the Government Nominee Director (Representative of ONGC) of the company effective January 05, 2022."
Officials said as per rules, Mittal also sent her resignation from the HPCL board to the Union Ministry of Petroleum and Natural Gas – the parent ministry of ONGC and HPCL.
The ministry however rejected the resignation and asked Mittal to continue on the HPCL board for "strategic reasons", they said.
ONGC thereafter approached HPCL for reinstatement but the company said it wanted written instructions from the ministry as it had already accepted Mittal's resignation and changed its books, officials said adding while the firms went into letter writing, HPCL's annual accounts for fiscal 2021-22 were approved without a nominee of its principal promoter.
A top HPCL official said the company is trying to resolve the issue and its relations with ONGC have improved since Joshi took over less than a month back.
"We have to realise that we are employee-directors on board and not promoter-directors," he said, referring to directors to PSUs being appointed in the capacity as government employees and not as promoters of the company.
Prior to this changed attitude, HPCL had refused to recognise ONGC as its promoter. It had ignored directives from the government as well as the Securities and Exchange Board of India (SEBI), forcing the latter to set a deadline of August 13, 2019, and warn of "appropriate action" if it failed. This forced the HPCL management to make amends.
Before the SEBI order, HPCL listed ONGC as a public shareholder in its regulatory filings. The President of India was listed under the promoter/promoter group category with nil shares.
In September 2018, SEBI first advised HPCL to re-file the shareholding pattern to the stock exchanges revising the status of ONGC as 'promoter'.
In June 2019, the ministry too directed HPCL to indicate 'President of India' as the promoter of HPCL and ONGC also to be added as a promoter below 'President of India'. These were ignored on the pretext that the company needed clarifications from multiple agencies, officials said.
In an August 6, 2019 letter, SEBI again advised HPCL to re-file the shareholding pattern to the stock exchanges for all quarters since the acquisition of shares by ONGC, while revising the status of ONGC as a 'promoter', by August 13, 2019, failing which appropriate action will be initiated as per SEBI Act.
HPCL made amends thereafter.
While the promoter tag did not bring any specific privileges to ONGC, a lack of the tag keeps it out of insider trading regulations as it gets the full agenda of every board meeting of HPCL and could be aware of price-sensitive information.
(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)