Haldia Petro board okays rights issue

520 mn shares to be issued at Rs 25.10 each

Financially troubled Haldia Petrochemicals Ltd (HPL)’s board approved a rights issue on Tuesday to infuse funds into the company. The company will issue 520 million shares at Rs 25.10 each (matching the quote offered by Indian Oil Corporation in October to buy the Bengal government’s 40 per cent stake stake in the petrochemical company) aggregating Rs 1,300 crore, said HPL Chairman and state Industries Minister Partha Chatterjee after the board meeting here. The issue would come in the next 30 days.

“We needed immediate funds to run the plant. So, we have decided to come up with a rights issue. This will save the company from going to BIFR (Board for Industrial and Financial Reconstruction),” he said.

The funds from the rights issue will be primarily used to buy naphtha, a key raw material for the plant.  

This is the first time  HPL is coming up with a rights issue after starting commercial production in 2001. If subscribed completely, it would not alter the company’s shareholding pattern, which is again under dispute.

“We have asked our legal team to make sure all legal angles are meticulously invigilated,” the HPL chairman added.

The rights issue comes when a state government to divest its stake to Indian Oil has hit a roadblock after the Supreme Court allowed co-promoter The Chatterjee Group (TCG) to approach the International Court of Arbitration in Paris on a contentious block of 155 million shares.

TCG founder and chairman Purnendu Chatterjee and lenders were present during the Tuesday meeting. For the first time, TCG offered to settle issues out of the court. TCG is the principal private promoter of HPL. The TCG chief told Business Standard: “I have been offering them (the HPL management) an out-of-court settlement option for quite some time, as we need a comprehensive financial solution.”

However, TCG did not comment on whether the rights issue was the right way to improve HPL’s financial health.

Uncertainty remains over whether West Bengal Industrial Development Corporation (WBIDC), through which the state government holds the 40 per cent stake in HPL, will be able to bring in funds for the rights issue.

On being asked about the need to bring more than Rs 400 crore for the planned rights issue, the HPL chairman said: “I will take the matter to WBIDC’s board and we have to see what are the options that can be used.”

HPL has been seeking Rs 1,000 crore from banks, which have been reluctant because of the legal battles the company is mired in.