Fis, Indian Oil Set Haldia Revamp Rolling

Haldia Petrochemicals' (HPL) debt and equity restructuring process has gained momentum with the consortium of financial institutions (FIs) and Indian Oil Corporation (IOC) engaging into hectic negotiations for a suitable arrangement acceptable to all.

The urgency shown by IOC, a typical public sector company often crticised for slow decision making, can be explained by the fact that the offer made by the company for participation as the fourth equity partner in HPL terminates on November 30.

The existing promoters of the company have issued mixed signals to the IOC overture. However, no restructuring would be possible without their consent. The Chatterjee Group (TCG), which has 43 per cent stake in HPL, is in favour of rescheduling of debt repayment and lowering interest rate independently of the shareholding issue.

 

The other equal shareholder, the West Bengal government, appears to be supportive of the stance adopted by the FIs led by Industrial Development Bank of India (IDBI). The third promoter, Tata Sons with 14 per cent stake, would like to offload its stake.

The FIs have stated that they would like to be assured about the source of funds that would cover the unsubscribed portion of HPL's equity, which would be about Rs 950 crore. Under the original project plan, this fund was to have been raised through a public issue after the project was completed or went into commercial production.

Top IOC officials have met representatives of IDBI, the principal lender in the project, in Delhi couple of days ago to build up a back to back arrangement for debt and equity restructuring.

IOC's initiative also stemmed from the realisation that the company may loose substantial naphtha market if it does not get HPL into its fold. The negotiated deal with IPCL has fallen through over pricing and Centre has decided to call fresh bid for IPCL divestment. In full capacity, HPL would use 1.4 million tonne naphtha per annum.

Although talks between IDBI and IOC are yet to yield results, the discussion gains importance as financial institution led by IDBI had made participation of IOC in the Rs 5600 crore project a pre-condition for working on the high cost borrowings.

However, the HPL management has always maintained that both debt and equity restructuring should go hand in hand and one can not precede the other. The other members of the consortium ICICI, IFCI, LIC and SBI.

Indian Oil wanted to pump in over Rs 500 crore with management control. It was in favour to reduce the authorised share capital of HPL at least by Rs Rs 725 crore. While IOC was in favour of deducting cost overrun from the original project cost of Rs 5170 crore, HPL promoters have added it to project cost resulting in wide gap in valuation.