Bengal taps IndianOil to help HPL
Kolkata   26-Apr-2012

The Bengal government has initiated a dialogue with the IndianOil to bring the public sector giant as a strategic investor into Haldia Petrochemicals Ltd (HPL).

Strategic investors are those who infuse funds into a project for long-term gains and play a role in decision-making. Such investors usually hold a stake of at least 26 per cent in a company.

The IndianOil, now a minority stakeholder with 8.89 per cent shares in HPL, has been approached to inject fresh funds into the petrochemicals company, which is in dire need of cash after four consecutive years of losses. The combined losses have been put at Rs 1,940 crore.

If the latest effort comes through, it will mean that the Trinamul-led government has pulled off what could not be done when the Left was in power. A plan by the IndianOil to raise its stake to 26 per cent and play a greater role in HPL with the support of the then Left Front government had not materialised following opposition from private promoter Purnendu Chatterjee.

However, unless Purnendu Chatterjee stumps up cash to bail out the company now, not many options are left before HPL other than tapping a strategic investor.

HPL's bankers have already written to its promoters to inject fresh equity. At least one of the lenders has specifically suggested that a strategic investor should be brought in but has not named anyone. In recent communications, the IDBI, the lead banker to HPL for term loans, and the SBI, the lead lender for working capital loans, have reminded the promoters of their obligation to bring in Rs 300 crore of equity or long-term non-interest-bearing funds.

Some lenders have also refused to provide fresh loans to HPL unless the promoters arrange for more equity. "They (the financial institutions) have clearly said that the losses cannot be funded by more loans. The promoters must bring equity or long-term non-interest-bearing funds to tide them over the difficult time," a company official said.

Given the tight financial situation of the government, it will be difficult for the state to spare Rs 300 crore now.

Purnendu Chatterjee's The Chatterjee Group (TCG), on the other hand, is peeved at not getting majority control of HPL and has filed an arbitration case at an international court against the state over the ownership issue.

Frequent technical snags, a downturn in the petrochemical market and a tiff between the principal promoters ' TCG and the Bengal government ' have affected the company's performance.

On top of that, the company has forecast a loss of around Rs 300 crore in the financial year that has just commenced. The projected blow does not include a possible Rs 100-crore entry tax on naphtha, the basic raw material, and the Rs 190 crore the company may have to forego if the state government does not renew an expired incentive scheme.

Bengal industries minister Partha Chatterjee, who recently took over as HPL chairman, is likely to visit the plant later this week to boost the morale of employees.