Kolkata: The only way to rescue Haldia Petrochemicals Ltd (HPL) from running aground is to sell it to a competitor with deep pockets, according to Partha Chatterjee, West Bengal’s commerce and industries minister and HPL’s newly appointed chairman.
HPL’s losses are mounting—its accumulated losses are estimated at Rs 1,900-2,000 crore—as its promoters, the West Bengal government and The Chatterjee Group (TCG), have been squabbling for years over management control.
A file photo of PS Bhattacharyya, MD, HPL
With the state government, which owns 40% in HPL, deciding to cash out without further delay, interlocutors have begun persuading TCG to also agree to sell its stake. TCG, which owns 41% of HPL’s shares, says it has rights to an additional 155 million shares, representing about a 9.2% stake in the firm.
West Bengal Industrial Development Corp. Ltd (WBIDC) in 2002 agreed to sell these shares to TCG but aborted the deal after years of negotiations, because, according to the state government’s lawyers, TCG failed to infuse funds to revive HPL. The transfer of these shares would give TCG majority control in HPL.
TCG says WBIDC couldn’t legitimately pull the plug on the share transfer having already received the first tranche of payment for them. The money, though, was later returned.
HPL and the state government moved the Calcutta high court this week seeking to stall the arbitration, but failed.
The high court on Friday ruled in favour of TCG saying it could “distinguish” outstanding disputes between it and WBIDC and that TCG could seek adjudication to resolve them.
TCG, according to its lawyers, has already deposited $120,000 (Rs 64.5 lakh) with ICC for the arbitration.
Under the joint venture agreement from 1994, TCG has the right of first refusal on shares owned by WBIDC. But the state government has formed a view that TCG chief Purnendu Chatterjee does not have the resources to buy WBIDC’s stake in HPL, according to a person on the firm’s board. He did not want to be named.
“Some people have begun persuading Purnendu Chatterjee to sell his stake in the interest of the company, but I don’t think they have made much progress,” this person said. “So much mistrust has grown between the two promoters over the years that they do not, at times, behave rationally when dealing with each other.”
The only way to determine the price of WBIDC’s shares is through an auction, minister Partha Chatterjee said in an interview. “We wish to sell our stake in HPL even if Purnendu Chatterjee doesn’t agree to do so immediately,” he added.
But this may not be possible in view of the legal dispute over the 155 million shares that WBIDC had proposed to transfer.
Speaking on condition of anonymity, a key TCG official said there was no question of selling out immediately. “Solution lies in transferring the 155 million shares,” he said. “The state government could thereafter determine the valuation of its shares through a book building leading to an IPO (initial public offering).”
The West Bengal government was initially concerned that it might not get a fair valuation of its stake if it sells immediately in view of the company’s difficult financial situation, but it appears that the minister has realized that the situation would only worsen with time, said the HPL director cited above.
romita.d@livemint.com
