Financial Daily from THE HINDU group of publications
Wednesday, Jan 16, 2002
Government - States
Bengal's offer to Chatterjee on HPL marks a new chapter
Rabindra Nath Sinha
KOLKATA, Jan. 15
THE West Bengal Government's latest decision to allow Mr Purnendu Chatterjee, an NRI partner of the Soros-Chatterjee combine, a controlling stake of 51 per cent in Haldia Petrochemicals Ltd marks the most crucial step to save the company from the serious financial difficulties and problems over ownership stakes that had surfaced over a year ago.
Mr Chatterjee is indeed the saviour of the Haldia petrochemicals project; for after the late Darbari Seth decided in early 1993 to disassociate Tata Tea from it, the chances of it materialising once again became dim, forcing the Left Front Government, which had posed the project to the Centre in 1978, to mount fresh efforts to find a co-promoter.
Mr Chatterjee offered to be the principle private sector co-promoter and before 1993 was out, he could complete all formalities for the plunge; much to the relief of the West Bengal Government and Mr Jyoti Basu. Despite the withdrawal by Tata Tea, which was to be the principle private sector co-promoter, Mr Ratan Tata agreed on the participation of Bombay House as a minority partner in the venture. Finally, the Haldia petrochemicals project became a reality in the first quarter of 2000.
Currently, HPL's shareholding pattern is: 43 per cent by West Bengal Government through West Bengal Industrial Development Corporation, 43 per cent by Chatterjee Petrochem (Mauritius) and 14 per cent by Bombay House through Tata Electric Co. As the Tatas now want to withdraw, the West Bengal Government will first acquire their 14 per cent, then offload eight per cent to Mr Chatterjee, thus allow him a controlling 51 per cent.
He, on his part, has made a commitment to bring in an additional Rs 107 crore as advance against equity, an arrangement that had to be devised by the promoters to the save the project from financial crunch stemming from an uncertain capital market situation that had prevented HPL from making a public issue as envisaged.
If HPL's financial difficulties are mainly due to the inability to raise funds by issuing shares to the public, the problems it has been contending with over the issue of ownership stakes can be attributed to the idea to draft a fourth partner and, as an extension of that, the offer of the public sector oil major, Indian Oil Corporation, to play the second saviour's role.
IOC's offer has remained in the news for almost 10 months now. Perhaps, taking note of HPL's financial plight, it set stiff terms - (i) it would pick up 26 per cent but seek management control, (ii) it wants the project value to be deflated by some 12 per cent or so and (iii) supply of naphtha would be its prerogative.
It goes without saying that IOC's terms were not at all to Mr Chatterjee's liking. Clearly, IOC was seeking to de-emphasise Mr Chatterjee's role in HPL in the future. A section among the decision-makers in the West Bengal Government, it would appear, did not like Mr Chatterjee's stance. In his own way, he was putting up a fight - by delaying his contribution of Rs 107 crore, although the two other partners had discharged their obligations in this regard quite some time ago.
The latest decision of the West Bengal Government reflects its appreciation of Mr Chatterjee's role in translating into reality the much-delayed project to stall which the Congress(I) Government at the Centre had used the instrument of licensing. It needs to be noted that the project, conceived in the control era, fructified in the liberalisation era.
By standing behind Mr Chatterjee, Writers' Building has also conveyed a message to prospective entrepreneurs and promoters that they can count on the State Government. It is also apparent that Mr Tarun Das of CII, who took over as HPL's chairman a few months ago, has done his bit to open a new chapter in the history of the beleaguered outfit.
It now remains to be seen how Mr Chatterjee utilises his new-found freedom vis-a-vis HPL. It will be for him to decide if there should be another partner; it will be for him to organise funds that HPL badly needs and it will be for him to devise a strategy that will remove the question mark over HPL's viability.
Accommodating a new partner should pose no problem, as the West Bengal Government would like to divest/dilute its stake. But, on top of his agenda has to be renegotiation of the interest rate with the lenders.
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