He spent Rs 36,915 crore to acquire a majority stake in the company. But to get its sole designated director appointed to the HPCL board, ONGC has to work hard through the paperwork.
For more than five months, Oil and Natural Gas Corporation (ONGC) no longer has a representative on the board of directors of Hindustan Petroleum Corporation Ltd, a company in which it has held a 51.11% stake since January 2018.
HPCL, under its new chairman Pushp Kumar Joshi, is trying to resolve the situation, senior officials said.
HPCL, for more than a year and a half – between January 2018 and August 2019 – did not recognize ONGC as its promoter despite the government selling its entire 51.11% stake in the company to the oil explorer.
He only relented after a rap from market regulator SEBI. ONGC has obtained the right to appoint an HPCL administrator called ‘Government Nominee Director (Representative of ONGC)’.
The officials said that since then, ONGC has appointed one of its directors as the nominee director. Its last appointed director was Alka Mittal, Director (HR), who was appointed to the HPCL Board in April 2021.
In January this year, Mittal was given the additional charge of chairman and CEO of ONGC following the incumbent’s retirement.
And consistent with the company’s past practice that the chairman could only serve on a subsidiary’s board as chairman and not as a director, Mittal resigned from the HPCL board and another director has been appointed.
HPCL quickly took notice. In a January 6, 2022 filing, HPCL said, “Alka Mittal tendered the resignation of the Government Appointed Director (CGSB Representative) of the company effective January 05, 2022.”
Officials said that, in accordance with the rules, Mittal had also sent his 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 remain on the HPCL board for “strategic reasons”, they said.
ONGC, after that, approached HPCL for reinstatement, but the company said it wanted written instructions from the ministry because it had already accepted Mittal’s resignation and changed its books, officials said, adding.
At the same time, the firms embarked on writing letters; HPCL’s annual accounts for the 2021-22 financial year were approved without the appointment of its main promoter.
A senior HPCL official said the company was trying to resolve the issue and that its relationship with ONGC has improved since Joshi took over less than a month ago.
“We have to realize that we are salaried directors on board and not promoter directors,” he said, referring to directors of PSUs appointed as government employees and not as promoters of the company. .
Prior to this change in attitude, HPCL had refused to recognize ONGC as its promoter. He had ignored government and Securities and Exchange Board of India (SEBI) guidelines, requiring the latter to set a deadline of August 13, 2019, and warn of “appropriate action” in the event of failure.
This forced HPCL management to make amends.
Prior to the SEBI order, HPCL listed ONGC as a public shareholder in its regulatory filings.
The President of India was listed as a promoter/group of promoters with zero shares.
In September 2018, SEBI first advised HPCL to re-file the shareholding scheme with the stock exchanges revising ONGC’s status as a “sponsor”.
In June 2019, the ministry also ordered HPCL to list “President of India” as a sponsor of HPCL, and ONGC also to be added as a sponsor under “President of India”. These were ignored as the company needed clarification from multiple agencies, officials said.
In a letter dated August 6, 2019, SEBI again advised HPCL to refile the shareholding plan for all quarters since the acquisition of shares by ONGC while revising the status of ONGC as as “promoter” by August 13, 2019, failing which appropriate action will be initiated in accordance with the SEBI Act.
HPCL made amends after that.
Although the promoter tag did not bring any specific privileges to ONGC, the absence of the tag keeps it out of insider trading regulations.
He gets the full agenda for every HPCL board meeting and could be privy to price-sensitive information.