NCLT grants 90-day lifeline to Nagarjuna Oil Corp for insolvency resolution

At least three to four investors including PSU players like Indian Oil and Indian and foreign entities seek control of the beleagured firm

Nagarjuna Oil Corporation Ltd (NOCL) has received an extension of another 90 days for its Corporate Insolvency Resolution Process (CIRP), even as public sector and private investors get set to bid for control of the company. The National Company Law Tribunal (NCLT) approved the extension, as the process could not be completed within the stipulated 180 days.

A single bench of the NCLT issued an order extending the CIRP for 90 days, starting January 21, in response to an application filed by Resolution Professional S Rajendran. The application was filed as per a resolution of the Committee of Creditors (CoC).

Nagarjuna Oil Corporation has attracted considerable interest from at least three to four strong investors out of a total of 20, to bid for a resolution plan as per the expression of interest (EoI) floated by the Resolution Professional. 

The bidders' list includes public sector players, foreign and Indian investors, said a source, who requested anonymity.

In August 2016, Hyderabad-based Nagarjuna Oil Refinery Ltd, the promoter of NOCL, had informed the exchanges that various prospective investors had sought information on the NOCL's six-million-metric-tonne-per-annum (MMTPA) petroleum oil refinery project at Cuddalore, some 200 km south of Chennai. The interested parties included public sector companies such as Indian Oil Corporation 

PSUs like HPCL, ONGC and foreign investors such as Shell had earlier made moves to acquire NOCL, but none of them was successful.

The CoC has to select a resolution plan and submit it to the NCLT a month ahead of the last date of the resolution period.

The company's total debt stands at about Rs 90 billion, of which Rs 80 billion consists of loans extended by about 15 banks. Once the recovery is made and the vendors, employees and other are repaid, the shareholders would be paid based on CoC approval.

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

Most of the statutory clearances for the refinery are in place, with a few requiring renewal. Land is available to accommodate expansion of 30 MMTPA. VAT benefit in the form of structural financial assistance and VAT refund up to Rs 180 billion (minimum is Rs 124 billion and maximum is Rs 180 billion) is also available as per a Government Order issued after the Tamil Nadu Government's Global Investors Meet 2015. 

NOCL has been on the lookout for a strategic investor, who would pump in fresh equity and revive the project, since 2012. It has been reported earlier that in order to commence the project, it would require around Rs 140-150 billion, including debt and principal amount.