IOC may carry out fresh due diligence on Haldia

Indian Oil Corporation (IOC) may carry out a fresh due diligence on Haldia Petrochemical Ltd (HPL) for picking up a stake in the latter.

In a meeting today, called by the ministry of petroleum and natural gas (MoP&NG) and attended by officials from GAIL, IOC, government of West Bengal, a promoter in HPL, and lenders, the issue of PSU investment in HPL was discussed.

Even though no final decision was arrived at the meeting, IOC could be asked to make a due diligence afresh on HPL, sources close to the development, said.

"IOC is back in the contention as a suitor for HPL even as GAIL had gone ahead with its plan," sources added.

The development follows the fact that MoP&NG is of the view that the oil major has better synergy with HPL than GAIL.

IOC has a refinery next to the West Bengal based petrochemical plant and it can supply naphtha which is the feedstock for HPL, from there. In fact, IOC is the largest refiner in the country while HPL is the largest merchant buyer of naphtha.

IOC also has an ambitious plan to enter petrochemical sector and an alliance with HPL will strengthen its position in the market dominated by Reliance.

However, the path ahead is far from easy because HPL does not need more than Rs 150 crore from any PSU as per the corporate debt restructuring package worked out by lenders.

On the other hand, MoP&NG is not in favour of oil PSUs making portfolio investment in any company.

"Whether it is GAIL or IOC, the management control must be with a PSU over a long term horizon. They can start with a small stake but there has to be a clear roadmap how the PSU would take up management in the company," sources added.

Even though West Bengal government is in favour of a PSU investment in HPL, the lead promoter, The Chatterjee Group (TCG) is unlikely to support the idea at all.

With the CDR proposals being effected and petrochemical cycle in the rise, HPL hardly needs any PSU to bridge the gap of Rs 457 crore which CDR had asked to put in the company. HPL is coming up with an initial public offer (IPO) which can take care of this requirement.

However, state government is of the view that a PSU should be inducted in HPL for future expansion of the project. The present capital infusion of Rs 600 crore is being used to retire debt and reduce interest burden.