The Telegraph
Since 1st March, 1999
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Gail-HPL stake pact in 3 weeks

New Delhi, Jan. 10: Gail India is likely to clinch a deal by the end of this month with Haldia Petrochemicals under which the state-owned company will pick up a 10 per cent stake in the petrochemicals company.

Gail chairman Prashanto Bannerjee told The Telegraph that the company has completed the due diligence exercise for HPL and will be investing around Rs 200 crore to pick up the equity.

He said both Gail and HPL were negotiating with the Industrial Development Bank of India (IDBI) and other financial institutions to restructure the debt of the beleaguered petrochemicals company.

He said that ultimately Gail would pick up the stake only if the financial institutions restructured the debt to make HPL financially viable for the future. Under the debt restructuring formula approved by IDBI, the petrochemicals company is required to bring in an additional equity of Rs 700 crore by February in two tranches.

The HPL management had promised IDBI that Rs 500 crore would be injected in the company by November 30 last year and the remaining Rs 200 crore by February this year.

The HPL management had said that Gail would invest Rs 200 crore in HPL’s equity and another Rs 300 crore will come through a marketing alliance which was struck recently.

Another Rs 200 crore will be shovelled by the company from some other source. HPL is saddled with a debt burden of Rs 4,200 crore and a net loss of Rs 500 crore. Gail had asked Ernst & Young to carry out a study on HPL’s future business growth. At a recent meeting, Banerjee had spoken about the synergy between Gail and HPL.

Earlier, HPL had held talks with Indian Oil Corporation but talks broke down after the oil major insisted on management control of HPL with a 26 per cent stake. The IOC demand had been resisted by Purnendu Chatterjee of The Chatterjee Group, one of the majority shareholders of the Rs 5,170-crore company.

Gail will buy products worth Rs 600-700 crore from HPL over six years. HPL will securitise this assured revenue to generate Rs 300 crore in cash. The talks between HPL and the FIs has been going for over a year. The two sides are still split on the debt-recast plan.

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