Hindustan Petroleum Corporation Ltd (HPCL) plans to merge with or acquire Mangalore Refinery and Petrochemicals Ltd (MRPL) by the end of the fiscal year 2018-2019.

MRPL has been the subsidiary of public sector undertaking ONGC (Oil and Natural Gas Corporation), while HPCL, has recently become its subsidiary too when it was acquired for Rs 36,915 crore.

HPCL has expressed its interest in merging with MRPL to make up for the fuel shortage gap that it has and add more products to its output. As a response to a query asked by the PTI press reporters, it said that it was trying to make the merger happen within this fiscal year.

In its fourth quarter ended March 2018 financial results, it had reported a 4 percent drop in its net profit from lower refining margins and inventory gains. The net profit stood at Rs 1,748 crore from Rs 1,819 crore in the year-ago period.

HPCL operates a 7.5 MTPA (million tonnes per annum) refinery in Mumbai and 8.3 MTPA unit in Visakhapatnam. Its subsidiary, HPCL-Mittal Energy Ltd operates 11.3 MTPA unit at Bhatinda. If the deal takes place, MRPL would bring a 15 MTPA refinery capacity, making up for the shortage it has.

The merger can happen either by

1. buying out ONGC's shares in MRPL (currently worth a little over Rs 12,300 crore) or
2. share-swap, wherein ONGC will get more shares in HPCL in lieu of it giving up its control in MRPL or
3. a combination of the two.

In the January-March quarter, its inventory gain was lower at Rs 157 crore against Rs 460 crore last year.

A company gets inventory gains when it sells at a higher rate than what it was bought for. The selling price is set as per international rates which fluctuate by the time the shipment reaches India. There will an inventory loss if the price reverses.

It had posted its highest-ever net profit of Rs 6,357 crore on a turnover of Rs 2.43 lakh crore for the complete financial year of 2017-18, up from net profit of Rs 6,209 crore on a turnover of Rs 2.13 lakh crore in 2016-17.