Calcutta, Oct. 8: Legal advice has held that the Bengal government can process the lone formal bid by Indian Oil Corporation for the state’s shares in Haldia Petrochemicals Ltd.
If the government accepts the legal advice, the key question will be if the IOC offer has matched the reserve price that is expected to be discussed by a group of ministers tomorrow. The offer has to match or cross the reserve price for the process to continue.
The legal firm advising the state on the divestment process feels that the right of first refusal HPL’s existing private promoter, The Chatterjee Group (TCG), enjoys could be construed as the second bid.
“The state officials were told that TCG has a right to make a bid to match the IOC price quote. Hence, there will be two bids in the process,” said a source.
In the absence of a formal bid by Reliance Industries Ltd and others that initially evinced interest, IOC remains the sole bidder in the field for the 39.9 per cent shares owned by the state government.
Had the solitary bidder been a private firm, the government would have found it difficult to go ahead with the process. The legal opinion has made the IOC bid even more palatable but the decision lies with the political leadership.
If the government decides to continue the process with one bidder, the focus will shift to the IOC’s offer price — a point of feverish speculation among several officials today.
The bid has not been opened yet but the speculative suggestions ranged from Rs 8.5 a share (below the Rs 10 face value of each share) to Rs 19.
In 2005, when the Left was in power, TCG was offered the government shares (numbering 67.5 crore) at Rs 28.80 apiece. But HPL’s value has eroded since then and its net worth has been nearly wiped out.
Another factor that is expected to weigh on the offer price is a 345-day window that is available to the government to close the entire deal. According to the share purchase agreement, the entire process will be completed by September 2014.
Till the full deal goes through, the share purchaser will not be able to influence decision-making in HPL. This means if the losses continue to mount in the interlude, they have to be borne also by the purchaser waiting in the wings.