Calcutta, Oct. 10: Haldia Petrochemicals — Bengal’s showpiece industrial venture — moved a step away from the brink of collapse after the Mamata Banerjee government accepted the “only valid” bid from Indian Oil (IOC), paving the way for the entry of the PSU as the lead owner of the company.
The formal announcement came in the afternoon, bringing down the curtain on the uncertainty surrounding the stake sale process after the price bid for the government’s 39.9 per cent stake evoked lukewarm response from prospective investors.
“After a series of meetings of the group of ministers on HPL, the Bengal government has accepted the offer from IOC. It was the only valid bidder,” industries minister Partha Chatterjee said at the West Bengal Industrial Development Corporation’s office on Camac Street.
The minister declined to divulge the price but hinted it would be more than the reserve price.
Government sources estimate that the state may net around Rs 1,715 crore from the stake sale, which includes 67.5 crore of equity and 27.1 crore of preference shares.
According to an estimate, IOC has offered Rs 25.10 per equity share but only Rs 20 crore for the preference shares. Sources said IOC was only looking at buying 1.7 crore preference shares. This would mean the rest would remain as preference equity.
The government, in consultation with transaction adviser Deloitte, had fixed the reserve price at Rs 20 per share. Though the figure is lower than the Rs 28.80 per share the erstwhile Buddhadeb Bhattacharjee government had offered to The Chatterjee Group (TCG), the existing private promoter of HPL, in 2005, the valuation will nonetheless be creditworthy.
Haldia Petrochemicals was making profit in 2005 unlike now when the company is on the brink of a closure because of the paucity of funds.
HPL’s net worth has got almost eroded following years of successive losses. There is apprehension in the management that the company might have to halt production unless fresh cash comes in to shore up its capital base.
Later in the day, minister Chatterjee said, “It was a challenging job to maintain the operation, keep the morale of the employees up and carry on with the stake sale process. I am happy that a navaratna like IOC has come forward. HPL is poised for a new future.”
The focus now shifts to TCG, which would now be given the right of first refusal (RoFR) on the government shares. The minister indicated that the letter offering the right of first refusal would be issued soon.
TCG officials could not be contacted for comment. A text message left to Purnendu Chatterjee, chairman of TCG, and Anirudhha Lahiri, president of the group, elicited no response.
Purnendu would now have a month to exercise the RoFR. If he agrees to match the price, he will have another month to bring in funds and buy the state’s share. If TCG declines to use the RoFR, or fails to bring in money, the shares will be offered to Indian Oil.
IOC declined to comment on today’s development, indicating that it would still be a month before a clear picture emerged. Industry observers said there was a possibility that TCG would bring in a partner to exercise its rights.
Six firms — IOC, Reliance Industries (RIL), Cairn India, ONGC, GAIL, Essar — had initially submitted expressions of interest for the state’s share and finally four were in the fray.
Surprisingly, only IOC went ahead and submitted a formal price bid on time. There was speculation that RIL, too, sent communication on the day of the bid, but its offer was not considered to be valid.
The state government took legal opinion on whether it would proceed with IOC’s single bid. After receiving positive response from the legal adviser, the GoM on HPL opened the price bid yesterday and informed chief minister Banerjee.
Today’s development could mark the beginning of the end of a long saga over the control of HPL’s ownership and management.
TCG has staked a claim on over 15.5 crore equity shares that were part of today’s transaction and is awaiting the verdict of the Supreme Court. If the court ruling goes in TCG’s favour, it would become a nearly 49 per cent owner. But even then IOC would still be a formidable force as it already has 8.89 per cent share in the company.
“The PSU acquired the shares at Rs 10 in 2005. This gave them confidence to go ahead and bid despite litigation and HPL’s poor financial health,” said an industry observer.
IOC has the best synergy with its refinery adjacent to the HPL plant. The PSU produces naphtha, which is the basic raw material for polymer, HPL’s main output.
DOWN THE YEARS
1985: HPL incorporated as a venture between WBIDC and the RP Goenka Group
1990-93: RPG exits and Tata group steps in
1994: Purnendu Chatterjee becomes part of the venture by signing an MoU with WBIDC and the Tatas
1997: Project execution starts
2001: Commercial production commences
2002: WBIDC transfers 15.5 crore shares to TCG but the transaction was not completed
2005: State decides to sell remaining 520 million shares to TCG, but the deal again falls through. TCG approaches Company Law Board
2007: CLB rules the entire stake should be sold to TCG. State approaches Calcutta High Court which rules in favour of the state. TCG approaches Supreme Court
2011: Supreme Court dismisses TCG petition against the decision of the Calcutta HC; Mamata Banerjee-led govt decides to sell the state’s entire stake in HPL through competitive bidding
2013: The ball is set rolling for the stake sale
Oct. 7: The day of auction; only IOC puts in a valid bid
Oct. 10: State govt accepts IOC’s bid