Kolkata: The West Bengal government on Wednesday formally announced that it will sell its 40% stake in Haldia Petrochemicals Ltd (HPL) through an auction.
A government order to that effect will be issued soon, the state’s commerce and industries minister Partha Chatterjee said on Wednesday.
However, the Calcutta high court in a recent order asked the state government and The Chatterjee Group (TCG), HPL’s other promoter, to maintain status quo until all outstanding disputes being heard by it are resolved.
This means that though the state government may start preparing for the stake sale, it will not be able to conclude the transaction without the court’s clearance.
TCG and the state government have been fighting legal battles for at least seven years over control and ownership of HPL. Disputes arose from the aborted transfer of the state’s stake to TCG.
The state will honour TCG’s first right of refusal on its shares, according to the minister. TCG, which owns 41% in the firm, will be given an opportunity to buy the shares held by West Bengal Industrial Development Corp. Ltd but it will have to match the price offered by the highest bidder, said Partha Chatterjee. He is also HPL’s chairman.
HPL’s managing director Sumantra Choudhury said he hadn’t yet received a copy of the said Calcutta high court order, but he was confident that it will not affect the state government’s plan to sell its stake. Choudhury wants the state government to expedite the stake sale because HPL’s finances are in a shambles and the management is struggling to keep its plant running.
HPL is struggling to cope with acute working capital shortage and mounting losses. Banks have said they wouldn’t lend to the firm, which is currently indebted to the tune of Rs 4,000 crore, unless a strategic investor was brought in.
A panel of ministers headed by West Bengal’s finance minister Amit Mitra recently advised the state government that it should wash its hands of the beleaguered firm. For almost a year, the state government has been saying that it will sell its stake in HPL through an auction, but it is only now that a formal decision has been made.
TCG last month wrote to the ministerial panel opposing the proposed auction. It said there was no provision under HPL’s articles of association to determine the valuation of the state government’s stake through competitive bidding.
The minister’s statement to the media on Wednesday indicates that its views have been rejected by the state government.
With a formal notification being issued, TCG now has the option of moving court to stall the proposed sale of shares, but according to HPL’s former managing director Partha S. Bhattacharyya, the company is unlikely to survive another protracted legal battle. Bhattacharyya said so in a formal note to HPL’s board several months ago.
A spokesperson for TCG wasn’t immediately available for comments.