Energy major Oil and Natural Gas Corporation may have to wait for the ministry of divestment's nod before it acquires the stake of Hindustan Petroleum Corporation Ltd  in ailing Mangalore Refinery Petrochemical Ltd.

Since HPCL has been put on the block by the government and its divestment is expected to be over during the next fiscal, the view of the ministry will play a crucial role in deciding its investment in various entities, including MRPL.

"We intend to buy out HPCL's stake in MRPL. However, the MoD's view would have a bearing on when and how the oil marketing company will sell its stake," said Subir Raha, chairman and managing director of ONGC.

There would be two options before the MoD. It can sell MRPL before the divestment takes place.

Secondly, it can value HPCL with its stake in the refining company. In that case, ONGC would have to negotiate the deal with the new owner of HPCL.

ONGC may like to avoid the second option and buy out HPCL before it is actually put on the block.

Experts believe that the MRPL stake would eventually depress the valuation of HPCL since the former has huge carry forward losses on its balance sheet.

HPCL holds a 37.4 per cent stake in loss-making MRPL but this would slide to 16.4 per cent post-restructuring which will witness fresh capital infusion by ONGC. The stake of ONGC would then go up to 51 per cent.

ONGC has to buy out HPCL's residual stake in MRPL since it intends to merge the loss-making refining company with itself in the longer term to realise tax benefit. ONGC can set off its tax liability against the Rs 2,800 crore (Rs 28 billion) accumulated losses of MRPL.

ONGC, with a profit of over Rs 5,100 crore (Rs 51 billion), is one of the largest corporate taxpayers in India.

The oil major bought out the A V Birla Group in the nine-million-tonne refinery project for Rs 59.43 crore (Rs 594.3 billion) or Rs 2 per share.

The acquisition will provide ONGC, which is predominantly an oil exploration and production company, with a strong downstream presence.

The refinery will be important especially after the company enters retailing of transport fuels. The deal had been in the news since August 2002 when the Birla Group signed a share purchase agreement with ONGC.