Calcutta, Oct. 7: Indian Oil Corporation has emerged the sole on-time bidder for the Bengal government’s shares in Haldia Petrochemicals Ltd (HPL).
The status of Reliance Industries, considered the frontrunner, was not definite with a section of the government claiming that the company had submitted a “conditional” and “late” bid while others said it did make any offer at all. Reliance did not make any official comment.
Reliance, owned by Mukesh Ambani, was among five private and state-run companies that had shown interest in the state’s 39.9 per cent stake.
Those who claimed Reliance put in a “conditional” bid said the company did so between 2.30 and 3pm, well past the 11am deadline before which the public-sector giant IOC had submitted its price offer at the Camac Street office of the WBIDC. The sources did not say what the conditions were.
However, a section of the state government contested suggestions that Reliance had submitted a bid, insisting that IOC was the sole bidder.
In the evening, industries minister Partha Chatterjee said the decision on selecting the highest bidder had been deferred by a few days. “We are not in a hurry. Everything will be done in a transparent manner,” he said.
If IOC alone is picked as the bidder and its offer matches or crosses the reserve price, it will rob the government of a chance to showcase a private sector giant like Reliance.
But the Maharatna IOC will be a palatable and controversy-free choice in a one-bidder scenario. Besides, IOC is best equipped to tap the potential of HPL which is in the financial doldrums now.
Cairn India Ltd, GAIL-OIL combine and ONGC, the other three who had evinced interest, did not submit any bids.
It is not clear why Reliance, which was keen to pick up the stake for some time, waited beyond the deadline. Some blamed the larger economic downturn. Reliance was also said to be keen on full control, not a piecemeal deal.
Sources said the WBIDC is meeting tomorrow to decide the course of action. Thereafter, the group of ministers on HPL will meet and the final decision is expected to be announced by Thursday.
The big decisions before the government are whether to take into account the conditional bid of Reliance or to accept the lone bid from IOC or to re-tender.
If a bid is above the yet-to-be disclosed reserve price and accepted, The Chatterjee Group, controlled by Purnendu Chatterjee and which holds over 40.87 per cent stake in HPL, will have the first right of refusal. TCG has a month to decide if it wants to match the price and another to bring in the funds. If TCG passes up the chance, the government shares will go to the bidder.
Multiple factors make IOC the ideal choice for the government if the company’s offer crosses the reserve price.
One, it is always easier to defend a one-bidder auction if the sole qualified aspirant is a public sector firm than a private one. “None was favoured. If even after that, one party comes, so be it. Moreover, it is not a private firm,” a state official said.
This decision will have to be taken by the political leadership in consultation with the finance department that will look into the nitty-gritty.
Two, IOC is already familiar with HPL and its problems. If IOC buys the government’s 39.9 per cent stake, the public sector company’s share in HPL will go up to 48.79 per cent because it already holds close to 8.89 per cent in the Bengal company.
Along with state-run financial institutions that should have no problem in supporting a public sector company, IOC can control the functioning of HPL.
Three, IOC is a more snug fit to HPL than others in the original field. IOC has a refinery near HPL in Haldia. The refinery produces naphtha, the basic raw material for HPL which makes polymer that goes into the making of plastic.
Some sources said Reliance officials were told to turn back while they were on their way to Camac Street in the morning.
The company had apparently raised two points last week. First, it sought fiscal incentives for the proposed investment in HPL, suggesting that sops for new projects should also be given for reviving a unit.
Second, it was keen on a waiver of the entry tax on naphtha, HPL’s main raw material, since Reliance would bring it from the Jamnagar plant in Gujarat.
However, other sources pointed out that none of these are last-minute occurrences and would have been raised and addressed earlier had they been clinching issues. Ambani was the biggest draw at the Mumbai industry meet hosted by the chief minister on August 1.
Tense moments preceded the announcement by minister Chatterjee this evening. The group of ministers of Chatterjee, Amit Mitra, Subrata Mukherjee and Manish Gupta met at 11am at the Camac Street office.
After nearly two hours, the ministers trooped out for “tiffin”. Then they crossed the Hooghly, reached Nabanna, the new secretariat, conferred with chief minister Mamata Banerjee and returned around 2.15pm.
Soon, IOC representatives were told that Reliance had put in a bid. The PSU objected. The ministers went into a huddle and three left later. Minister Chatterjee made the announcement at least two hours later but declined to name the bidder(s).
IOC is accepted as the sole bidder. If the IOC quote matches or crosses the undeclared reserve price, The Chatterjee Group will be given a chance to match the price. If TCG does, with or without the help of a big investor, the government shares will go to TCG. If not, they will go to IOC
The IOC bid is below the reserve price. This round will be cancelled and the whole process will have to start afresh, which will put HPL’s future at stake
This round is cancelled because there is only one bidder. But IOC’s public sector status is likely to work in its favour as corruption charges are unlikely
to be levelled even if it
remains the sole bidder
The Reliance “conditional” bid is also taken into account. IOC is likely to challenge this in court, citing the 11am deadline