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The bidding process for disinvestment of the West Bengal Government’s stake in the sick Haldia Petrochemicals (HPL) is finally over, with State-owned IndianOil promising to pay a handsome Rs 24-25 per share.
Considering the negative book value of HPL and the market outlook on the petrochemicals sector, analysts rate IOC’s offer as “fairly aggressive”, offering the State a revenue mop up opportunity of nearly Rs 1,700 crore.
The bidding process has also opened up opportunities for co-promoter The Chatterjee Group (TCG) to end the dispute over HPL’s ownership issues.
TCG can either exercise its first right of refusal on the State’s stake of 67.5 crore equity shares (nearly 40 per cent) and 27.10 crore preference shares at the price offered by IOC, or it can use the opportunity to exit the project.
With a nearly 41 per cent stake, TCG can expect to get a little more than what the State Government will get, by selling its interests in HPL to IndianOil. The downstream oil major has made it clear that it was looking forward to gain full control in the petrochemicals project and rope in ONGC as a joint venture partner. But those in the know of things do not expect an early solution to HPL’s ownership issues.
First, the State Government has to wait at least till November 10 to know if TCG is interested in exercising its first right of refusal. And, if TCG agrees, it will get another month to make the necessary payments.
There is also the case in the Supreme Court on the ownership of about 15.5 crore shares (nearly 9 per cent), now held by the State Government.
If the verdict goes in favour of the TCG group, it will end up controlling a little over 50 per cent stake. And, the State’s holding will come down to 31 per cent.
That doesn’t mean that TCG can take control of HPL. Since the company has never paid dividends, the State government is eligible to exercise voting rights against preference holding.
Assuming IOC ends up acquiring the 31 per cent holding from the State Government, it will have to depend on the Government to be in control of a petrochemicals project that doesn’t have money even to pay for feedstock.
With neither TCG nor the State showing much interest in infusing fresh capital, it is doubtful if there will be any significant change in HPL’s financial health in the near term.
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