A clash of titans is on the cards over the acquisition of the West Bengal government’s 31% stake in the ailing Haldia Petrochemicals Ltd (HPL). Mukesh Ambani’s Reliance Industries Ltd (RIL) and Indian Oil Corporation (IOC) are the frontrunners to buy the stake offered by the West Bengal government.
Sources said the stake is valued at between Rs. 2,000 crore and Rs. 2,700 crore and final price bids are expected in October
“We should be able to announce the winners in two to three weeks,” a senior government official told HT. “A final decision on HPL’s stake sale will, however, be taken by the group of ministers (from the West Bengal government) on HPL .”
Besides, RIL, India’s largest private sector company, and IOC, the country’s biggest commercial enterprise, ONGC, GAIL, Jindal Steel and Power, Essar Group and NRI billionaire Anil Agarwal’s Cairn India have also evinced interest in the company.
The West Bengal government holds a 39.9% stake in HPL through West Bengal Industrial Development Corporation (WBIDC), all of which was earlier put on the block.
However, HPL’s co-promoter the Purnendu Chatterjee-led The Chatterjee Group (TCG) has staked a legal claim on a 9.18% slice of the state’s shareholding. So, the remaining 31% was offered to the bidders with the understanding that the decision on the balance disputed stake will be made after the Supreme Court’s decision.
Deloitte is the transactional advisor for HPL divestment.
TCG, which has a 41% stake in HPL, will get a month’s time to match the price of the highest bidder as it has the right of first refusal, the sources said.
The balance shares are held by Tata Motors, Tata Power and a few banks and financial institutions.
It may be recalled that TCG was ousted from the management of HPL by the West Bengal government following disputes related to management control in the mid-2000s. As the TCG group could not invest fresh funds required to run the company, the state government took over management control of HPL from TCG.
While Essar has formally announced that it is out of the HPL race, sources within ONGC and GAIL said the two companies may opt out as their proposal for a joint bid was turned down by the West Bengal government following objections from bidders like RIL. For Cairn and JSPL, sources said “it could be more of testing waters for these two companies.”
The fight over acquiring this stake in HPL may prove to be an interesting one as integrating HPL with their existing operations of refining and petrochemicals offer great synergies to both IOC and RIL. In addition, IOC also has an added advantage as it already holds an 8.89% stake in the petrochemical company.
HPL has been facing sell off and legal issues for a long time now and the lack of working capital in the company has resulted in huge accumulated issues, pegged at about Rs. 1,980 crores.
In 2012-13, HPL incurred a net loss of Rs. 907 crore on a turnover of Rs. 9,600 crore. Over 50% of its peak networth has already been eroded as of March 31, with debt topping Rs. 3,500 crore.