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Marriage of inconvenience: HPCL will have little to gain from merging with ONGC
Mar 24: The proposed marriage between ONGC and HPCL is not really going to work well
8The organizational culture is different for the two entities
8Refining margins are not strictly linked to oil prices, while marketing margins are deregulated. Marketing volume is a function of consumption and economic growth. Pipeline volumes depend again on marketing, while the margin is linked to railway freight.
8ONGC’s margin, on the other hand, is completely linked to oil prices.
8It is claimed that the combined entity would have an RoE of 15.5%, while HPCL alone would make an RoE of 23% if not merged with ONGC. This would be a concern for existing investors of HPCL.
8There is no synergy in this merger
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