New Delhi, Dec. 10: Indian Oil Corporation has tossed its hat into the ring once again with some impressive money-muscle flexing in its bid to become the principal partner in Haldia Petrochemicals Ltd.
The company, which had walked out in a huff a little over a year ago after prolonged quibbling with existing shareholders over management control and the equity pattern, has now cobbled together a Rs 5,700-crore package to turn Haldia into a world-class petrochemical manufacturing hub.
Indian Oil chairman M.S. Ramachandran met Bengal industries minister Nirupam Sen on December 2. Sources said the company sent a formal proposal to the state government yesterday with detailed investment plans.
The package is broken into two parts: an equity infusion of roughly Rs 700 crore and investments of a little over Rs 5,000 crore.
The company is ready to undertake a large capacity expansion in the existing plant and set up new units, including a huge styrene plant that will be the first of its kind in the country. It has said the projects will be implemented on a war footing if it is given management control.
Earlier, the private partner in Haldia, the Chatterjee group, had resisted parting with management control. There was also the problem that Indian Oil wanted management control but on the cheap, with only 26 per cent of the equity, showing reluctance to part with more money.
The massive investment and equity infusion now committed by Indian Oil are likely to melt the opposition of the Chatterjee group while the state government, which is the other large partner, is expected to extend a more than warm welcome.
First, it is keen on ending the uncertainty over the future of this prestigious project. Second, it wants to sell its stake and get out. The government and Purnendu Chatterjee hold 43 per cent each.
Financial institutions and banks, which are lenders to Haldia, are eager to bring in Indian Oil, which was the first public sector unit the Bengal government had negotiated with before turning to Gail Ltd.
Indian Oil had then offered to invest Rs 468 crore in the equity in exchange for management control. Two years have gone by since it made its first offer and the general impression in the oil industry is that Haldia has lost valuable time.
Gail stepped in as the talks with Indian Oil hit a dead end by agreeing to pump in Rs 200 crore without management control. Chatterjee informed the lenders that the company would raise another Rs 268 crore to take the total fund infusion to Rs 468 crore.
However, the lenders said they would not restructure the debt unless Rs 600 crore was pumped into the company by way of equity. Without recasting the debt Haldia’s chances of survival are bleak because, of the Rs 5,170-crore project cost, more than three-fourth is borrowing, which puts a huge burden by way of repayment and interest charges.
The current partners have balked at the sum the lenders are insisting on by way of equity.
A senior Indian Oil official said the company “would not hesitate to invest up to Rs 700 crore in Haldia Petrochem’s equity if the banks insisted on it. It is not a problem for us as the company has a synergy with Indian Oil’s Haldia refinery. This needs to be exploited to the advantage of both the companies, which will spur industrial growth in Bengal.”
Indian Oil plans to invest Rs 15,000 crore in petrochemicals and the state government has been informed that if Haldia Petrochem does not join hands with it, it would have to compete with plants built with this formidable capital.
With Reliance Industries beginning to emerge as a strong rival, Haldia Petrochem would find it difficult to battle two incomparably superior competitors in terms of financial muscle on its own.