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IOC toys with Haldia joint control

Calcutta, Feb. 2: Indian Oil Corporation (IOC) is prepared to accept the idea of a 50:50 joint venture with The Chatterjee Group (TCG) to revive the fortunes of Haldia Petrochemicals, a climbdown from its earlier stand of at least a 51 per cent stake and majority control in Bengal’s showpiece industrial project.

The maharatna PSU is okay with the possibility of Haldia Petrochemicals (HPL) being a board managed company and not under the control of any particular corporate entity.

IOC had in the past indicated that it would not settle for anything less than management control, which would mean owning more than a 50 per cent stake.

However, the PSU now seems to have realised that a controlling stake will not be feasible at the moment given the persistent opposition by TCG, HPL’s founding promoter. But IOC will not agree to being just a minority shareholder, either.

“We cannot be a portfolio investor. We cannot be less than anyone. Our board will never accept it. But we are agreeable to a board managed company,” an IOC official said.

At present, IOC has an 8.89 per cent stake in HPL compared with TCG’s 40.87 per cent even though the latter has staked claim to another 15.5 crore shares.

TCG is preparing for arbitration at the International Chamber of Commerce, Paris, over this block of shares with the West Bengal Industrial Development Corporation, a state government agency. If the result of the arbitration goes in TCG’s favour, it will become a majority shareholder in HPL with a stake slightly over 50 per cent.

IOC is against such a situation as it will not accept any minority position.

There are many ways to get around such an impasse to ensure both IOC and TCG are on the same footing.

For instance, IOC may pump fresh funds into HPL to increase stake. It can also buy out the rest of the minority shareholders — the FIs and the Tata companies.

“Once there is discussion, many possibilities may come up. This has to be initiated by the seller (WBIDC). But unfortunately, that is yet to happen,” the official said.

IOC had emerged as the lone bidder for WBIDC’s stake in HPL, agreeing to pay Rs 25.1 per share. The deal, including the contentious 15.5 crore shares, was to be concluded by November 8, 2013. But various legal complications have derailed the process.

IOC wrote a letter on December 17 seeking clarification on the deal. A week later, the then industries minister Partha Chatterjee invited IOC chairman R. S. Butola for talks. But within days of the letter, Chatterjee was replaced by Amit Mitra.

Sources said Mitra had spoken to Butola over phone once and met Purnendu Chatterjee, the chairman of TCG, several times in Calcutta over the past four weeks.

Industry observers said IOC’s new stand clearly demonstrated that it was keen to play a greater role in HPL along with TCG despite their acrimonious relationship in the past.

Chatterjee went to court in 2005 when the then Left Front government shoved IOC into Haldia.

Bankers to HPL, who have a bigger exposure than all promoters put together, are also betting big on IOC’s induction.

Precarious financials

There is a growing apprehension that HPL may soon be closed. Its net worth has been completely eroded, making it a sure case for the Board for Industrial and Financial Reconstruction, unless some last minute cash infusion or financial engineering comes to its rescue.

Banks have also decided not to extend any loan. In this scenario, the company has to come up with a novel scheme to keep the cracker unit going.

It is seeking advance from customers of its products (polymer and chemical) and paying back later with interest.

It is generally asking 25 per cent of the product value as advance and paying a 22 per cent interest on delivery. But instead of cash, it is paying interest by giving products of equal value.

“The practice shows that all other source of finance dried up. The management is using the advance for working capital,” said a petrochemical industry official.

On account of a sustained loss in the last four years, HPL has little cash to buy raw material naphtha and is, hence, producing below capacity.

 
 
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