Calcutta, July 11: Haldia Petrochemicals (HPL) has managed to turn the corner in the last fortnight with the help of Rs 150 crore in fresh loans from public sector banks, leaving behind the worst quarter in its history.
The company has started making a small profit at the operating level after suffering a loss of Rs 400 crore in the April-June quarter of this year when it could produce half of its capacity because of a funds crunch.
Active persuasion by the Bengal government led by industries minister Partha Chatterjee, who is now the chairman of Haldia Petro, has improved the situation in the last two weeks with banks bringing in funds.
The State Bank of India, IDBI and Allahabad Bank provided extra working capital loan to the company to buy more naphtha, the raw material, which helped in increasing production to 70 per cent.
“Banks have come forward with funds. I am happy. But more needs to be done. I am appealing to them to sanction more loans so that HPL comes back to sustainable profitability,” Chatterjee said.
The buoyancy in the petrochemical business has helped the company, too. Falling naphtha price improved profitability, giving the banks the confidence to lend to HPL. That HPL did not default on its interest or principal re-payment despite being under severe financial strain also helped its case.
Corporate observers cautioned that the situation was far from being comfortable and more funds, both in terms of loan and equity, needed to be injected.
The company is hoping for another Rs 150-200 crore financing from banks so that production can be ramped up to near full capacity.
The government is also trying to persuade Standard Chartered Bank to reinstate a credit line. “Petrochemical plants must run full throttle to make profit at the net level,” an expert said.
HPL pays Rs 25 crore as interest and another Rs 35 crore goes in depreciation. “The company has to reduce its interest burden to become profitable over the long term. It also needs cash to tide itself over the bad market and expand. The only solution is to bring equity. Either owners (Bengal government and private promoter The Chatterjee Group) bring fund or they induct a strong player such as the Indian Oil Corporation,” an HPL observer said.
HPL has an accumulated loss of Rs 400 crore on its books till March 31, 2012.
The minister, who held a meeting with a team of experts, senior bureaucrats and HPL managing director Sumantra Chaudhuri at Writers’ Buildings today, said the procurement of naphtha from domestic sources and product swapping were two other measures HPL was looking at to improve profitability, apart from cash management.
“We have to look at various routes to procure more naphtha. IOC has promised to increase naphtha supply by 15000 tonnes per month. We have to consider the domestic market and lower dependence on foreign sources,” Chatterjee said.