The Telegraph
Friday , June 13 , 2014
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Lenders lukewarm to Haldia Petro promoter patch-up

Revival hurdle

Calcutta, June 12: Lenders to Haldia Petrochemicals have sought a road map for fresh capital infusion in the financially beleaguered company from the existing promoters of Bengal’s showpiece industrial project.

In a meeting held in Mumbai yesterday, financial institutions that have lent close to Rs 4,000 crore to HPL stressed the need to bring in equity into the company to make it financially stable.

The stance of the lenders assumes significance as it comes despite the assurance provided by the Bengal government and The Chatterjee Group, lead promoters of HPL, to bury their decade-long dispute.

The state cabinet last week formalised a decision, taken before the general elections, to hand over the government’s shares and management control to private promoter TCG, which is owned by entrepreneur Purnendu Chatterjee.

The Telegraph had first reported about the patch-up between the warring promoters on March 6, 2014. The decision to hand over the reins of HPL to TCG could not be ratified by the cabinet then because of the election code of conduct.

The dispute between the state and TCG was so far seen as the biggest stumbling block to the revival of HPL.

Therefore, the promoters were hoping that the lenders would back the resolution by extending fresh loans to jumpstart the revival.

However, the lenders pointed out that the resolution of the dispute, whereby TCG buys out the stake of the West Bengal Industrial Development Corporation, alone would not be enough.

“So far the lenders were backing HPL as the Bengal government was a significant player effectively controlling the company. Once it exits, HPL becomes a private company. Hence, lenders want to be very cautious of taking fresh exposure unless the private promoter itself brings fresh equity,” sources said.

HPL requires close to Rs 2,000 crore non-interest bearing fund for sustainable long-term revival. The money needs to be used to replenish working capital, retire high cost borrowing and develop a new product stream to beat the cyclical nature of the commodity petrochemical business.

The company has been suffering losses over the last four years, nearly wiping out its net worth. HPL had suffered a loss of over Rs 1,070 crore in 2012-13.

The Mamata Banerjee-government took to the bidding route to look for a deep-pocket investor. IOC turned out to be the sole valid bidder by offering Rs 25.10 apiece for the state’s 67.5 crore shares.

But the deal could not be concluded because of legal issues raised by TCG, which has now agreed to buy 52 crore shares of the West Bengal Industrial Development Corporation at the same rate as IOC.

The state also agreed to honour an agreement made in 2002 for the remaining 15 crore shares. According to the deal, the shares were sold to TCG at a face value of Rs 10 per share.

However, TCG had been looking to raise a loan to buy the shares worth Rs 1,350 crore. Under RBI guidelines, financing the purchase of shares in a domestic company is allowed only in the cases of divestments in central public sector units.