Bengal accepts IOC's bid for HPL stake buy

IOC to its 40 per cent stake in HPL

The West Bengal government has accepted the only “valid” bid — of Indian Oil Corp — to buy its 40 per cent stake in Haldia Petrochemicals Ltd (HPL).

After several rounds of meetings with a group of ministers (GoM), Partha Chatterjee, the state’s industries minister and HPL chairman, said: “We have accepted IOC’s as the sole valid bid.”

IOC, which already holds about nine per cent in the company, had submitted its bid on Monday. The state government has kept the reserve price for the stake sale a secret, while IOC officials claim they are not aware.

Now, Purnendu Chatterjee-led The Chatterjee Group (TCG), the other principal promoter in HPL, will be given a chance to match IOC’s bid, according to its right-of-first-refusal (RoFR) agreement with the West Bengal government.

“The RoFR will be sent to TCG; the reserve price will be disclosed only after that,” said an IOC source who did not want to be named.

TCG will get a month’s time to decide whether it wants to match the IOC bid. If it decides to match, it will get another one month to submit the bid amount to the government.

The minister indicated he wanted to send the RoFR letter to TCG soon. IOC sources said the government might send the letter tomorrow.

The earlier Left Front government had offered to sell the stake to TCG’s Purnendu Chatterjee in 2005, at Rs 28.80 a share. But that had not worked out.

The interest of Mukesh Ambani’s Reliance Industries in HPL was an open secret but it had not made a formal bid for the state’s stake in HPL.

If TCG decides not to match the offer and IOC buys the stake, the state-run company would be well positioned to gain management control in HPL.

“If we get the stake, we would turn the company around. But much of that would depend on how TCG exercises its RoFR,” an IOC source said. The location of the oil major’s refinery, close to the HPL plant in Haldia, gives it a synergistic advantage.

The state government had invited an expression of interest in May. Six major companies — Reliance Industries Ltd, Cairn India, GAIL, ONGC, Essar Oil and IOC — had expressed interest. On Monday, a drama was played out at the city’s WBIDC building when the government did not open the bids and decided to postpone it to Thursday. IOC had given its bid within the stipulated time but a communication from Reliance Industries on its interest in HPL was received — after the deadline and some prodding from the government.

The government, apparently, had discussed re-tendering, but HPL’s poor financial health did not permit that. Its net worth eroded from Rs 2,347 crore in 2009-10 to Rs 2,097 crore in 2010-11. This marked the beginning of its downhill journey. With intermittent plant shutdowns, the net worth slid further, to around Rs 500 crore as on March 31, 2013. The HPL plant has been running at 60-65 per cent capacity due to acute fund shortage.