The West Bengal government’s plan to sell its stake in the loss-making Haldia Petrochemicals Ltd (HPL) got a severe jolt today as ratings agency ICRA downgraded the company’s debt.
The ratings cut follows a delay in repayment of HPL’s debt obligations. The agency revised the long-term rating outstanding on Rs 2,421 crore term loans and Rs 600 crore fund-based facilities of HPL from ‘B’ to ‘D’. The short-term rating of outstanding on the Rs 2,106 crore non-fund based facilities of HPL was cut from ‘A4’ to ‘D’.
“This may hamper the state government’s plan to offload its 39.9 per cent stake in eastern India’s largest petrochemical firm. With the company’s earning per share touching minus 5 and increasing contingent and commitment liabilities, it will be difficult to find takers in the auctioning process. ICRA move shows that this may be in default soon,” said an official close to the development, requesting anonymity.
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The company is co-promoted by the state government and the Kolkata-based The Chatterjee Group (TCG).
TCG Chairman Purnendu Chaterjee termed the ratings cut as “extremely unfortunate”.
"It’s very sad and unfortunate day for HPL," he said, while refusing to comment on the government's stake sale plan.
Companies such as Mangalore Refinery and Petrochemicals Ltd, Indian Oil Corp Ltd, Reliance Industries Ltd and GAIL (India) Ltd were keen on HPL stake. The downgrading may also impact HPL’s search to raise an additional Rs 1,000 crore credit line for working capital. The state government has already appointed Deloitte India to execute the divestment plan and a valuation process is going on.
As of March 2012, the firm’s accumulated loss was around Rs 1,800 crore. However, showing a brave face and crying foul on the ICRA move, HPL Chairman and the state Industries Minister Partha Chatterjee said: “The ICRA downgrade was uncalled for. A meeting is already scheduled for January 7 with lenders, so I don’t see any logic behind this move by the agency.”
The firm, which was already reeling under a fierce ownership battle between the two promoters —TCG and the state government— was finding it difficult to raise money for the working capital.
Asked whether the ICRA move may play spoilsport on auctioning plans, HPL Managing Director Sumantra Chowdhury said: “The valuation of a company’s share depends on the assets they have and not on illogical moves by a rating agency. How can you downgrade HPL when it is going to have a crucial meeting with the lenders?.”
West Bengal Industrial Development Corp, through which the state owns its stakes in the firm, has given a three-month mandate to Deloitte to complete the entire process.
Last year, the Supreme Court had dismissed a petition by TCG that challenged a high court verdict that set aside a Company Law Board directive asking the state government to exit the project by selling its stake to TCG. The disputed shares between both the major shareholders are 155 million.
HPL’s plant capacity utilisation was also below 50 per cent for the last three months. According to sources, the state government is forcibly running the plant, suffering a loss of more than Rs 130 crore per month, while it could have saved about Rs 90 crore by shutting down the plant.
