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IOC may now pursue HPL

BS Bureau

Haldia Petrochemicals Ltd may finally look forward to a speedy resolution to its long-standing problem of debt and equity restructuring with the divestment of IPCL Ltd.

The tardy pace of IPCL's sell-off had indirectly stalled negotiations between HPL's promoters and Indian Oil Corporation, as the latter was in the fray for both petrochemical units.

By snapping up IPCL, Reliance has succeeded in halting IOC's ambition to enter petrochem business in a major way. Industry sources said IOC could now focus on HPL and more focused negotiations between IOC and HPL's lead promoter Purnendu Chatterjee of The Chatterjee Group and co-promoter government of West Bengal may be expected.

The 26 per cent HPL stake now on offer is estimated to fetch more than Rs 4.60 billion and may go up depending upon what sort of control premium IOC will be willing to pay.

TCG and GoWB are both reluctant to give up management control in HPL and also take a financial hit by decreasing their stake below 26 per cent from 43 per cent now. GoWB and TCG own 43 per cent each, while Tata Sons holds 14 per cent in the project.

IOC had been pressing for this deal. IOC may have to pay a premium for its 26 per cent stake which it was hoping to acquire at face value of Rs 10.

Such terms would be welcomed by all promoters, including the dormant Tata Sons, which has been seeking an exit from the project.

HPL now becomes the only platform for IOC to break into the petrochem big league in the country. HPL still enjoys 22 per cent polymer market share of India, second only to Reliance.

Moreover, IOC may lose naphtha supply contract in IPCL to Reliance Petroleum for its Vadodara plant to which it supplies 200,000 tonne of naphtha from the adjacent Koyali refinery. Reliance may now source the feedstock from its Jamnagar refinery.

The state-run refiner thus needs to firm up its deal with HPL for long term 100 per cent feedstock supply agreement to offset any loss on account of IPCL.

The talks of IOC's buying into HPL did not make much headway as both parties stuck to their demands.

While HPL board on March 26 accepted IOC's of contention of management control with 26 per cent stake, the oil PSU asked for more saying that it should be the single largest shareholder of the company.

TCG had strongly objected to this new IOC demand and in consequence the shareholder agreement could not be signed with IOC.

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