Kolkata: The West Bengal government is keen to sell its 43.27% equity stake in Haldia Petrochemicals Ltd (HPL) to its partner The Chatterjee Group (TCG)—a US-based group with assets of at least $1 billion (Rs4,680 crore) in diverse businesses such as financial services, petrochemicals, information technology, real estate and biotechnology—after almost four years of bickering and court cases over ownership and control of the company.
TCG, which currently owns a 44.23% stake in HPL, claims that under the original shareholders’ agreement between it and WBIDC, it has first right to the state government’s stake in the company. Ahmed Raza Khan / Mint
Incorporated in 1985, HPL, which was the first major industrial project in West Bengal in a long time, started commercial production in 2001. It produces polymers such as polypropylene and polyethylene, and chemicals.
Apart from TCG and the West Bengal Industrial Development Corporation (WBIDC), famed American financier George Soros and the Tata group had promoted HPL at a time when West Bengal was investment-starved.
In 2005, the state government had almost reached an agreement to sell its stake in HPL to TCG, but the deal fell through even after they agreed on the price—Rs28.80 per share—because Purnendu Chatterjee-led TCG wanted to buy the shares in instalments.
TCG, which currently owns a 44.23% stake in HPL, claims that under the original shareholders’ agreement between it and WBIDC, it has first right to the state government’s stake in the company. The state government does not dispute TCG’s so-called first right of refusal, but wants the stake sale to take place on terms set by it.
In 2005, after talks between the two main promoters failed, HPL issued 150 million shares for Rs150 crore to Indian Oil Corp. Ltd (IOC), giving it a 9.62% stake in the company. The company needed cash and the state government wanted IOC to join HPL as a strategic investor. TCG opposed the preferential allotment of shares to IOC and moved the Company Law Board seeking reversal of the transaction.
Differences widened as the legal battle raged on. In 2006, the state government again offered its stake to TCG. This time, it said it would determine the price for HPL’s shares and that TCG must either buy WBIDC’s shares or sell its own stake to the state government at that price. TCG spurned the offer.
“We (the state government and TCG) have been bickering over HPL for a long time…this should end,” West Bengal’s commerce and industries minister Nirupam Sen said. “We are willing to sell our stake to Purnendu Chatterjee… Our only condition is he has to buy everything at once.”
Aniruddha Lahiri, TCG’s president, said, “We have always been in favour of an amicable solution and our stand remains the same… TCG remains committed to the success of the venture (HPL).”
He refused to offer any further comments because the matter is sub judice. “Hearing in the Supreme Court is set to start later this month…so, we can’t say anything else on this subject at this point,” added Lahiri.
Besides TCG, WBIDC and IOC, the Tata group continues to hold a 2.88% stake in HPL. Under the debt restructuring package finalized in 2003, the firm was to issue some 135 million shares to lead lender Industrial Development Bank of India, which has since become a bank by converting a part of its loan into equity. But the shares have not been allotted to IDBI Bank yet.
TCG has been asking the HPL board to conduct a valuation of the company, but that has not been done yet, according to an HPL official, who did not want to be named because he isn’t authorized to speak to the media.
According to analysts, TCG might not offer as much as Rs28.80 a share now, HPL having posted a net loss of around Rs270 crore in the year till March after five years of continuous profits. The introduction of a 5% import duty on naphtha—the key raw material—last year, and decline in polymer prices put the company in the red.
In 2007-08, HPL, which is an unlisted company, had registered a turnover of Rs7,184 crore and a net profit of Rs262 crore.
For fiscal 2008-09, it was expecting a turnover of around Rs6,300 crore and a net loss of Rs140 crore. Audited figures for 2008-09 aren’t available yet.
HPL’s performance in 2009-10, too, may not improve because it had to take a 15-day shutdown for maintenance, and might have to suspend production again for at least two months if it plans to expand capacity.
The company had planned to raise production capacity by 30%, and this was to be done towards the end of 2006. TCG has been complaining that because of the delay, the cost of expanding production capacity has gone up substantially from the initially budgeted Rs675 crore.