 "After revival, HPL eyes revenue boost")
Fresh from a turnaround, Haldia Petrochemicals (HPL) is set to post a three-fold jump in revenue for 2015-16 at Rs 10,000 crore.
It is also on course to diversify into petrol retailing. Earlier this month, the Centre granted it a fuel retailing licence. “We won’t have to procure petrol (motor spirit) from elsewhere, as it is a by-product which is produced from our plants,” a top company official said.
HPL, a joint venture with the participation of West Bengal government, among others and promoted by The Chatterjee Group (TCG), has for long been selling pyrolysis gasoline or motor spirit in bulk to oil marketing companies (OMCs). The new licence enables it to retail directly. Earlier, the company had appealed to the government to allow it to retain the sales tax imposed on fuel sales to OMCs; it was, it said, losing Rs 300-350 crore a year by not retaining this. Annually, the company produces 25,000 kilolitres of motor spirit.
After the deregulation of petrol and diesel prices, Reliance and Essar had begun to vie for the retail market but the slide in global crude oil prices had halted this. In mid-2014, a barrel of crude was priced at $115; this fell below $30 by January 2016. HPL will be setting up around 100 petrol stations in phases, mainly in eastern India, to begin with. The project, whose investment estimates are yet to be worked out, will partly be funded from internal accrual; the majority of the funds needed will be taken as a bank loan. The grant of the licence requires the licensee to invest at least Rs 2,000 crore.
It is also investing Rs 300 crore to set up a 40,000-tonne per year capacity butane producing unit, to reduce its raw material dependency from other sources. It will use half the total it makes for own use and sell out the rest.
The plan to raise money from banks to finance its petroleum project will put stress on its existing loan portfolio. Debt has been unchanged at Rs 4,000 crore for some years. As on April 23, its assets were only Rs 264 crore. Servicing the existing loans, Rs 630 crore a year, will continue to be a drag.
“We are now aiming to consolidate our business entities, so that we may improve our operational performance,” said the official quoted earlier.
The company was on the verge of being declared sick in 2014, when its plant was shut for seven months due to non-availability of working capital. State Bank of India (SBI) came to the rescue, initially pumping Rs 350 crore to restart operations, later scaled up to Rs 900 crore. The promoters also invested Rs 100 crore. Later, Punjab National Bank, ICICI Bank and IDBI also contributed.
“At the same time, the market also started reviving and so did we,” the HPCL official said. The central government helped by dropping its demand that HPL pay tax of Rs 2,277 crore and accepting a request for more time to meet the statutory export obligation.
Earlier this year SBI head Arundhati Bhattacharya cited the examples of HPL, Suzlon and Jindal Stainless as doing much better after resolution of debt or sale of assets.
TIMELINE OF EVENTS
- 2011: Problems over ownership pops up between the promoters and the West Bengal government
- 2012: Global slowdown in petrochemicals starts straining balance sheet
- 2014: Plant shutdown for seven months owing to cash crunch. Promoters and consortium of banks pour in cash to restart plant operations. HPL was on the verge of being declared a sick company
- 2015: HPL bounces back. Global petrochemicals situation starts improving
- 2016: HPL gets petrol retailing licence. Plans to set up butane plant to reduce its dependence on procuring raw materials