Essar Oil pulls out of Haldia stake sale race

5 companies left in contest; price bids in a month

Essar Oil has decided to pull out of the race to acquire the West Bengal government's stake in Haldia Petrochemicals Ltd (HPL).

"After initial evaluation, we have decided not to pursue this opportunity anymore, since it does not fit into our overall strategy," the company told Business Standard. The move comes at a time when the due diligence process is about to end. Price bids are expected in mid-September.

After Essar's pullout, the companies remaining in the fray are Reliance Industries Ltd, Cairn India, Indian Oil Corporation (IOC), GAIL and Oil and Natural Gas Corporation (ONGC).

An HPL official said that after submitting its expression of interest for the HPL stake sale, Essar Oil had never shown interest in the process. He added the Essar team had never visited the plant to carry out due diligence. "After EoIs (expressions of interest) were submitted, all the companies were given specific dates to come and visit the plant. But Essar didn't pursue it," he said.

West Bengal industries minister and HPL Chairman Partha Chatterjee said, "I am not aware of the reasons that led to Essar's pullout, but it is a possibility they have reached an agreement with any other bidder to stop pursuing this project."

Some of the bidders have proposed changes in the process. While RIL has favoured an open auction, IOC and ONGC have requested for bidding through a joint consortium. The state government is considering both the options.

Though it was not clear why Essar decided to opt out, analysts say the company could be more judicious about its options. As on March 31, the company's current liabilities stood at Rs 28,359 crore, while non-current liabilities were worth Rs 16,670 crore.

Essar has a coal bed methane block in Ranigunj, West Bengal. The block has reserves independently evaluated at 18.8 million barrels of oil equivalent.

THE U-TURN

* Essar Oil pull-out can be in sync with other bidders in race, says HPL chairman

* Company says HPL does not fit into the overall strategy anymore

* Reliance Industries Ltd (RIL), Cairn India, IOC, GAIL and ONGC are in the race now

* Essar did not come to the plant after submitting its expression of interest for stake sale in HPL

* As on March 31, 2013 Essar Oil's current liabilities stood at Rs 28,359 crore while non-current liabilities were to the tune of Rs 16,670 crore

* Essar, however, has other interests in Bengal. The company has a coal bed methane block in Ranigunj, West Bengal