RIL, IOC, GAIL-OIL to bid for HPL stake on Oct 7

Reliance Industries, Indian Oil Corp (IOC) and GAIL-OIL combine are likely to bid for buying West Bengal government's 31% stake in the beleagured Haldia Petrochemicals Ltd (HPL) on October 7.

West Bengal government has invited price bid for sale of its 31% stake on October 7, three sources with direct knowledge of the development said.

"In all probability, the price bid will be opened on the same day itself," one of the source said.

RIL is considered frontrunner for buying the stake. It may however face a formidable competition from gas utility GAIL India Ltd which has teamed up with explorer Oil India Ltd (OIL).

Others who had submitted expression of interest for buying West Bengal government's stake in HPL are Anil Agarwal-owned Vedanta Resources through its subsidiary Cairn India, state-owned Oil and Natural Gas Corp (ONGC) and Naveen Jindal's Jindal Steel and Power Ltd.

ONGC is said to be reconsidering to make a bid while Cairn and Jindal have an outside chance because of their lack of prior experience in owning or operating a cracker.

Sources said RIL, GAIL and IOC are the only firms who have track-record of running big petrochemical plants.

Purnendu Chatterjee-led The Chatterjee Group (TCG), a joint promoter of HPL, will have the right of first refusal to match the highest bidder.

TCG, which holds 40.88% stake in HPL, will have 30 days to decide on matching the price quoted by the highest bidder and another month to make the payments.

Sources said the West Bengal government had in May sought buyers for its 39.99% stake, or 67.5 crore equity shares, in HPL. The stake put on the block included 15.5 crore shares on which TCG laid claim and approached the court.

The Calcutta High Court advised the state government to go ahead with the sale of the remaining stake, which is about 31%.

TCG holds 69 crore shares, or 40.88%, in HPL. IOC has an 8.89% stake as a strategic investor and the rest is with financial institutions and Tata Group companies Tata Motors and Tata Power.

Deloitte Touche Tohmatsu India is the transaction advisor to the West Bengal government and will manage the divestment.

Sources said while TCG has the right of first refusal, it will need to arrange for funds within a month.

HPL had an accumulated loss of Rs 1,980 crore at the end of March 31, 2012, and debt topping Rs 3,500 crore.

Further, the plant, located 125 km from Kolkata at Haldia, operates at about 65% of installed capacity.

Sources said HPL makes strategic sense to both IOC and RIL as they produce naphtha, the feedstock used to produce valuable chemical compounds.

Besides being able to supply naphtha from its Jamnagar refineries to HPL, RIL would get a readymade factory to cater to demand for petrochemicals in the eastern region.

IOC, which owns a refinery at Haldia, supplies a very small quantity of HPL's naphtha requirement as TCG imported the bulk of the needs.

Originally, Mangalore Refinery and Petrochemicals Ltd was interested in buying the stake but parent ONGC submitted the expression of interest. GAIL has a petrochemical plant at Pata in Uttar Pradesh and wants to expand in the segment.