The Iranian government representatives on the board of Chennai Petroleum Corporation are against the merger of the company with its parent, Indian Oil Corporation, because their stake in a merged entity would be insignificant. The Iranian government's arm Naftiran Intertrade Company currently holds a 15.4 equity stake in CPC.
The Iraninan government has been a shareholder in CPC since it was set up, in the 1960s. IOC, which holds a 51.8 per cent stake in CPC, needs the consent of the Iranian shareholders to effect a merger.
On the sidelines of CPC's annual general meeting on Wednesday, Naftiran's directors said they were considering increasing their stake in CPC. Naftiran is open to using the secondary market to increase its stake in CPC, they added.
And the fact that Naftiran is considering the possibility of increasing its stake in CPC means that a merger between IOC and CPC is unacceptable to the Iranian shareholder.
"We prefer to stay in a small house rather than rent a small place in a palace," said M B Samiei Khonsari, one of Naftiran's representatives on the CPC board, in a reference to its relative insignifcance in the event of a merger.
S Behuria, chairman of both IOC and CPC, told the media after the AGM that discussions of a merger are at a preliminary stage. He added that the Iranians are yet to formally communicate their position on a possible merger between CPC and IOC.
During the course of his address to the shareholders, Behuria said, "Size and scale have always been the key characterisitics of the oil industry." CPC, a standalone refinery, has a refining capacity of 10.5 million metric tonne a year.
The company recorded a net profit of Rs 597 crore (Rs 5.97 billion) on sales of Rs 14,188 crore (Rs 141.88 billion) last year as it was insulated from the price-related issues, which plagued oil companies like IOC that also market the petroleum products.