The Telegraph
Since 1st March, 1999
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Gail drags feet on Haldia investment

Calcutta, Dec. 31: Gail (India) Limited has not yet made up its mind on acquiring equity in Haldia Petrochemicals (HPL) even as 2002 draws to a close.

Gail’s indecisiveness may directly affect HPL’s financials. The petrochemicals company, which is already saddled with a debt burden of Rs 4,200 crore and a net loss of Rs 500 crore, had been asked by the Industrial Development Bank of India to bring in an additional Rs 700 crore for its much-needed debt restructuring.

Gail chairman Proshanto Banerjee said at the HPL board meeting on Monday that it has asked Ernst & Young to carry out a study on HPL’s future business growth.

Gail will discuss the equity issue with IDBI based on the study. The entire exercise will take another seven to 10 days.

“Banerjee spoke about the synergy between the two companies (Gail and HPL) and those present at the meeting felt he was hinting at acquiring a controlling stake in the company even though the Gail chairman did not spell it out,” a member present at the meeting said.

Earlier, Indian Oil Corporation had also sought management control of HPL with a 26 per cent stake, which was opposed by Purnendu Chatterjee of The Chatterjee Group, one of the majority shareholders of the Rs 5,170-crore company.

Meanwhile, the commercial agreement between Gail and HPL, cleared at the petrochemical company’s board meet yesterday, was signed today. Under the deal, Gail will buy products worth Rs 600-700 crore from HPL over the next six years. HPL will securitise this assured revenue to generate Rs 300 crore in cash.

According to the debt restructuring formula approved by IDBI, the petrochem company will have to bring in an additional equity of Rs 700 crore by February 2003 in two tranches.

The HPL management had promised the FI that Rs 500 crore would be injected by November 30, 2002 and the remaining Rs 200 crore by February 2003. The company said Gail would bring in Rs 200 crore, Rs 300 crore would come through a marketing alliance, while the remaining Rs 200 crore would come from another source.

However, the company has not been able to keep the commitments. “We are yet to know when HPL will bring in the additional equity. What’s more, they have also defaulted on their interest payment,” senior IDBI officials said.

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