Lenders to consider resolution plans for debt-ridden Nagarjuna Oil today

If the Committee of Creditors (CoC) do not select a bidder in the meeting, chances are that the refinery firm would go for liquidation.

The Committee of Creditors (CoC) for Nagarjuna Oil Corporation Ltd (NOCL) will meet on Tuesday to consider the resolution plans of prospective investors. 

According to sources, West Bengal-based Haldia Petrochemicals and GP Global, UAE, formerly known as Gulf Petrochem, are the potential bidders. Citax Energy, which has been pursuing the NOCL project for some time now, is also in the race, they said.

The National Company Law Tribunal (NCLT) earlier extended the period for Corporate Insolvency Resolution Process (CIRP) of NOCL by 60 days, and the deadline is expected to end in another two days from the date of this meeting. If the CoC do not select a bidder in the meeting, chances are the refinery firm would go for liquidation.

NOCL, a joint venture of Hyderabad's Nagarjuna Fertilizers & Chemicals Ltd (NFCL) and TIDCO of the Tamil Nadu Government, was carrying out a 6 million metric tonnes per annum (MMTPA) petroleum and oil refinery project in Cuddalore, almost 200 kilometers south of Chennai, but it got stalled due to a shortage of funds.

The project, for which the construction work started in 2009, had been partially completed in December 2011, when a cyclone and shortage of funds stopped work. With some additions, the plant can meet Euro VI requirements. 

The NCLT had earlier extended the period for Corporate Insolvency Resolution Process (CIRP) by 90 days with effect from 21 January 2018. The extension was granted as the process was not completed in the stipulated 180-day period.

Sources said the CoC has to decide whether the liquidation valuation of Rs 14.50 billion should be considered as the threshold or floor value for the bidding. The facility being developed by NOCL needs an additional investment of nearly Rs 150 billion over three years to get it ready for operations, and the bidders will have that in mind, they say. 

A decision to liquidate the company would mean that the proceeds would be very little and almost 2,000 acres of land out of the total 2,500 acres, allocated by the State government specifically for the project, will be taken back by the government.

In August, 2016, NOCL promoter Nagarjuna Oil Refinery had told the exchanges that various prospective investors, including public sector companies like Indian Oil, had sought information on NOCL's project at Cuddalore. PSUs like HPCL, ONGC and foreign investors like Shell have also made moves to acquire NOCL but none fructified.

Sources said the COC earlier felt that the BPCL’s bid was too low and said they would have to call fresh bids if BPCL did not increase its offer. BPCL took strong objection to this on the grounds that other potential bidders would now know the details of its bid terms and have an unfair advantage. 

According to earlier reports, the company has around Rs 90 billion of debt, of which around Rs 80 billion is bank loan, from 15 banks. Once the recovery is made and the vendors, employees and other, are repaid, the shareholders would be paid based on the approved mechanism.