Calcutta, Dec. 24: The Bengal government has invited Indian Oil Corporation chairman R.S. Butola next week to discuss the possibility of involving the public sector behemoth in a bigger way in the state’s showcase project Haldia Petrochemicals Ltd (HPL).
State industries minister Partha Chatterjee, who is also the chairman of HPL, has sent a letter to IOC this evening for a top-level meeting.
The move follows the approval of a Rs 1,300-crore rights issue by the HPL board today despite opposition from existing private promoter The Chatterjee Group (TCG).
HPL will offer 51.2 crore shares for rights at Rs 25.10 apiece, the rate at which IOC is seeking to buy into the firm. The Telegraph had reported this on December 17.
“The company management has been asked to draw a road map. We shall try to do the issue by avoiding legal complications as much as possible. We have to save the firm from becoming a non-performing asset and falling sick. Livelihood of thousands of people, directly and indirectly, depends on it,” Chatterjee said after a one-and-a-half-hour board meet today.
The issue will be completed within 30 days of the HPL management giving notice to the existing shareholders, which, apart from the West Bengal Industrial Development Corporation and TCG, include financial institutions, IOC and two Tata firms.
A back-of-the-envelope calculation reveals that the two principal promoters — TCG and the WBIDC — will have to stump up around Rs 525 crore each to subscribe to the rights issue.
TCG chairman Purnendu Chatterjee evaded questions on the rights offer. “HPL needs funds infusion. I have given a comprehensive plan to the board,” he said. The plan includes an offer for out-of-court settlement. TCG is fighting a number of cases over the ownership dispute.
The industries minister said TCG’s plan would take time to materialise, but HPL needed immediate cash. Sources said TCG had proposed a special purpose vehicle (SPV) to trade naphtha. The profit from the SPV will be ploughed back into HPL.
Partha Chatterjee skirted a question on whether the WBIDC had enough resources to subscribe to the rights shares.
“The board of the WBIDC has to take a call. The state government will not be able give any money,” he said.
He was also unable to clarify as to whom the rights shares would vest vis-a-vis the contentious block of 15.5 crore shares — the WBIDC or TCG.
It is likely that the rights shares will be offered to the WBIDC since it is the registered owner of the shares. However, the WBIDC may not subscribe to them to avoid further litigation.
There is a possibility that the WBIDC may renounce its part of the rights shares in favour of IOC. The top-level meeting would discuss this issue.
“The state government would like to renounce its shares in favour of IOC. But the PSU has to agree to it. IOC may also like to subscribe to only a part of it and not the whole. Only after a detail deliberation, the final picture will emerge,” said a source privy to the development.
If Indian Oil agrees to subscribe to the rights shares renounced by the WBIDC, its holding in HPL will go up. At present, IOC has an 8.89 per cent stake in the company.
At the meeting, the state government will also seek an easier term for naphtha credit from IOC. Industry observers said the induction of Indian Oil with a greater role was crucial for the petrochemical company, which needed to build facilities to make value-added products. IOC’s greater participation can make that possible since the PSU has deep pockets.
The HPL plant is now operating at 40 per cent of its capacity because it has no money to buy naphtha.
The company will be referred to the Board for Industrial and Financial Reconstruction unless fresh cash is infused. The rights issue will address that problem.