“We needed immediate funds to run the plant. So, we have decided to come up with a rights issue. This will save the company from going to BIFR (Board for Industrial and Financial Reconstruction),” he said.
The funds from the rights issue will be primarily used to buy naphtha, a key raw material for the plant.
This is the first time HPL is coming up with a rights issue after starting commercial production in 2001. If subscribed completely, it would not alter the company’s shareholding pattern, which is again under dispute.
“We have asked our legal team to make sure all legal angles are meticulously invigilated,” the HPL chairman added.
The rights issue comes when a state government to divest its stake to Indian Oil has hit a roadblock after the Supreme Court allowed co-promoter The Chatterjee Group (TCG) to approach the International Court of Arbitration in Paris on a contentious block of 155 million shares.
However, TCG did not comment on whether the rights issue was the right way to improve HPL’s financial health.
Uncertainty remains over whether West Bengal Industrial Development Corporation (WBIDC), through which the state government holds the 40 per cent stake in HPL, will be able to bring in funds for the rights issue.
On being asked about the need to bring more than Rs 400 crore for the planned rights issue, the HPL chairman said: “I will take the matter to WBIDC’s board and we have to see what are the options that can be used.”
HPL has been seeking Rs 1,000 crore from banks, which have been reluctant because of the legal battles the company is mired in.