Post this deal it is expected that ONGC will easily corner at least a 50 percent controlling share in Tide Water, after it either buys the 14 percent stake held by financial institutions or obtains their tacit support (a traditional practice with Indian financial institutions), and also makes an open offer for the 20 percent of the shares in the hands of public shareholders.

With a turnover last fiscal year (ended March 2005) upwards of Rupee 2,550 million (U.S. $58.5 million), profit exceeding Rs. 100 million ($2.3 million), sales of 43 million liters, a dividend payout of 100 percent, growth of 17 percent plus the solid infrastructure of five strategically located blending plants and a well-oiled network of distributors and dealers, Tide Water with its Veedol and Eneos (through a tie-up with Nippon Oil Corp.) brands is a tempting acquisition.

In its annual general report released June 6, Tide Water Chairman A. Mukherjee lauded his company’s performance, noting however “the overall lubricant industry remained depressed, due to the ongoing up-gradation of engine design and introduction of long-drain lubes” and to the rise of crude oil prices. Chief Executive N.R. Padmanaabhan asserted, “Our overall market share of 4 percent (10 percent of bazaar sales), high brand value and an excellent marketing network — many of our distributors continue their loyalty through the second generation — are our main strengths.” He added, “We are the strongest player in tractor oils and are an accepted force in the semi-urban and rural sectors.”

ONGC, hitherto exclusively an exploration enterprise, has in recent years acquired control of Mangalore Refineries and Petrochemicals Ltd. as well as a license to open a chain of 1,500 retail gasoline outlets, in a determined attempt to become a full-spectrum oil major operating along the entire hydrocarbon value chain. Its first gasoline station in Mangalore was inaugurated just three months ago, in March. Control of lube maker Tide Water is seen as a logical business move.

ONGC’s numbers are daunting: turnover up 40 percent this fiscal year at Rs. 460 billion ($10.6 billion), and net profit up 41 percent at Rs. 86.6 billion ($2 billion). It’s at the top of all Indian corporations listed in the Forbes 400 Global Corporations (rank 133rd) and in the Financial Times Global 500 (rank 326th) by market capitalization. It has been ranked the most valuable Indian corporation by market capitalization, net worth and net profits the last four years in a row. It produces 685 million metric tons of crude and 375 billion cubic meters of natural gas from 115 fields, and owns and operates 11,000 kilometers of pipelines in India, including 3,200 km of sub-sea pipelines. The ONGC Group has holdings in 10 foreign countries.

Tide Water is no stranger to divestment moves; it has been in the news since 2000 when the then-government vigorously pursued a privatization policy. Contenders Indo Burma Petroleum, Hindustan Petroleum Corp. Ltd., Bharat Petroleum Corp. Ltd. and Caltex even submitted formal expressions of interest in 2002. However, responding to popular sentiment that ushered in the new Congress Party-led government in 2005, all profit-making state-owned oil corporations were taken off the block. The ONGC proposition is in tune with current government wisdom, though, with control passing between two state-owned bodies.

Andrew Yule, for its part, is expected to make a decent killing as the Tide Water share price is at its highest ever, thereby partly easing its severe liquidity crunch and funding its restructuring plans.

Clearly the much-flogged “win-win” cliche applies to a T here. ONGC adds a respected lubricant brand to its portfolio, Tide Water gains from the stability lent by a cash-rich parent, Andrew Yule reduces its negative bottom line — and the government achieves asset transfer without ruffling any feathers.