Kolkata: The Chatterjee Group (TCG) and the West Bengal government—the squabbling co-promoters of Haldia Petrochemicals Ltd (HPL)—appear to be cautiously treading the path of reconciliation with the company showing signs of emerging from its worst performance since inception and a share sale to a strategic investor looking inevitable.

Fine balance: West Bengal’s commerce minister Partha Chatterjee does not want the animosity between HPL’s co-promoters to intensify. Photo: Indranil Bhoumik/Mint

TCG, which had said in its first reaction to Choudhury’s appointment in June that it was “shocked" at the “set-up job", isn’t, however, giving up its outstanding lawsuits against HPL and the state.

The developments gain significance from and come against the backdrop of HPL making a cash loss of 684 crore in the 15 months till 30 June—its worst performance in 10 years—while the company was in the hands of “financial wizards", according to Choudhury.

Former Coal India Ltd chairman Partha S. Bhattacharyya was HPL’s managing director for almost the entire period—he was a nominee of TCG. US-based venture capitalist Purnendu Chatterjee, who founded and heads TCG, was HPL’s chairman for about eight months till March.

Both have demitted office, and the state government has seized control of HPL.

Bhattacharyya quit HPL on 20 June, handing the reins of the company over to Choudhury, who was initially thought to be a state government nominee. (But he isn’t, the state government clarified at a subsequent meeting board after TCG cried foul over his appointment.) Purnendu Chatterjee was earlier ousted as HPL’s chairman in another board room coup, his post taken by Partha Chatterjee, the minister.

Amid bitter criticism by state government officials of the HPL’s performance in the five quarters till the end of June, Choudhury pointed out in a media presentation on 4 August that during this period, HPL’s indebtedness grew by over 1,000 crore to 3,857 crore.

Although the firm pared its long-term debt from 2,000 crore to 1,786 crore during this period, its short-term working capital borrowings grew from 805 crore to 2,071 crore—this included non-cash facilities from lenders such as letter of credit, which are essentially in the nature of guarantees and not, strictly speaking, bank loans to the company.

Choudhury’s media presentation said in the end that it was impossible for HPL to repay its loans from its normal business profits, and that a stake sale to a strategic investor was unavoidable. The state government, the presentation said, had made a commitment to lenders and credit rating agencies that HPL would induct a strategic partner within six months.

Asked if he would support the state government’s move to sell stake in HPL, Purnendu Chatterjee said TCG was no longer in the driver’s seat and that it could only “react" to what the state government did.

“Yes, HPL has suffered a huge cash loss (in fiscal 2012), but right now I don’t want to blame anybody for it," said Partha Chatterjee.

Before he quit, Bhattacharyya made presentations to HPL’s board explaining the loss, according to at least two directors, who did not wish to be named. He had cited two key reasons, they said: a sharp fall in the so called international tolling margin by $70 a tonne from fiscal 2010-11, and the many technical snafus that resulted in 9-10 unplanned plant shutdowns.

For the full year, HPL’s margin fell by about $100 million, or 500 crore, while plant collapse accounted for loss of production, or “opportunity cost" of an addition 500 crore.

That apart, the company spent more than 200 crore on parts and labour to repair the plant, according to the unnamed directors cited above. However, the plant appears to have stabilized since January, they added.

Bhattacharyya refused to comment.

Asked why HPL suffered so many shutdowns in a year, they said the plant, after expansion of production capacity, was restarted without conducting the so called performance guarantee test. Such a test would have resulted in most of the technical problems popping up at one go; but, instead, they manifested themselves in a series, forcing 9-10 shutdowns which cost, at times, 30-40 crore.

On 4 August, Choudhury also raised questions about HPL’s practice of importing naphtha from state-owned producers of Kuwait and Abu Dhabi, suggesting that it could have been more economical to buy HPL’s key feedstock from Indian firms such as Indian Oil Corp. Ltd (IOC).

TCG, according to the unnamed directors cited above, has lately written to the Comptroller and Auditor General of India, which scrutinizes financial performance of government-owned firms, for a “transaction audit" of naphtha procurements made by HPL since its inception.

HPL’s management has always defended its decision to import naphtha—its key feedstock, which accounts for 80-85% of the firm’s total operating cost—by saying that it is a better variant than those produced by Indian companies such as IOC because of significantly higher paraffin content. The quality of polymers that HPL manufactures improves and certain high end chemicals can only be produced with naphtha with a high paraffin content.

romita.d@livemint.com

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