Don’t invest in Haldia Petro, ministry tells IndianOil
New Delhi   09-Jan-2013

The Union petroleum ministry has issued directives to IndianOil to not consider any investment in Haldia Petrochemicals (HPL) since the oil major has no room to leverage its finances with government subsidy required to post profits.

IndianOil posted a R22,451 crore net loss in the first quarter of FY 13, though in the second quarter it came round the corner posting a R9,611-crore net profit.

A petroleum ministry official told FE that IndianOil’s 9.6% holding in HPL already has a negative impact on its balance sheet since HPL shares are R(-)5 per share at present. “Even if there are strategic interest in acquiring HPL, the government cannot allow a bleeding PSU to takeover another ailing company,” the official said.

Earlier, IndianOil had shown some interest of an outright purchase of the company if both the promoters, the West Bengal government and The Chatterjee Group, were willing to offer their stakes and go for an out-of-Court settlement with their disputes.

IndianOil is setting up a 15-million tonne refinery at Paradip and it can design its plant in such a way that it can produce high paraffin, low aromatic polymer grade naptha suited to HPL’s requirement. It conceived plan of supplying the entire 2 mt required naptha to HPL from its Paradip unit and could even dismantle HPL’s unit at Haldia and shift the plant to Paradip.

Shifting a petrochemical plant from one place to another is a common practice in the European petrochemical industry and IndianOil was toying with the idea. IndianOil has been trying to make an entry into the petrochemical business for a long time but the ministry has send a note to the company last week barring interest on HPL.

The consortium of HPL bankers, with IDBI being the lead bank, had convened a meeting on January 7 in Mumbai to understand IndianOil’s roadmap of striking synergy with HPL. But an IndianOil representative is learnt not to have attended the meeting on Monday.

HPL is on the verge of being registered with the board of industrial and financial reconstruction (BIFR) with its accumulated loss touching R1, 800 crore and net worth becoming less than half.

Its debt obligations are a near R5, 000 crore and Japan’s Toyo Engneering, HPL’s technology provider, has withdrawn the performance guarantee after it found that the plant was forced to run at a below 50% capacity.

Toyo has made clear that the plant has lost efficiency and has been hugely damaged for forcibly running at a 40% capacity for a long time.

In such a condition, the state government’s decision to put its 39.9 % share to auction has received a huge jolt. The government has appointed Delloite to revalue HPL to fix a price of its shares and then offload its own stake by March. TCG has the first right of refusal after the stakes are offered but it is difficult to get a buyer now, said an HPL source.