KPMG Peat Marwick, the management consultancy firm employed by Indian Oil Corporation (IOC) to conduct due diligence of the Rs 5200-crore Haldia Petrochemicals Ltd (HPL), will submit its report to the public sector oil major by the end of this month.
The consultancy firm has completed its on-site job and is busy analysing data collected from its six-week long exercise, industry sources said.
The IOC board will take the final decision on picking up stake in the debt-ridden project after going through the KPMG feasibility report. IOC had awarded the mandate to KPMG in March 2001.
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Although IOC had decided in-principle to participate in the project, the due diligence would determine the company's financial exposure to HPL. Moreover, the study would establish the route through which IOC's participation would take place. The premium at which IOC would buy into the project would also be decided on the basis of the KPMG report.
The IOC board had showed some caution in the past regarding buying a stake in the HPL project without a proper due diligence. It was in favour of restructuring HPL's operation in which the naphtha cracker would be converted into a separate business with a subsidiary company operating the polymer production unit. The valuation of the naphtha cracker stood at Rs 4500 crore and that of the polymer unit at Rs 1500 crore.
The restructured HPL is expected to have a paid-up equity base of 20 crore shares of face value of Rs 10 each, aggregating Rs 200 crore. Of this, 9.9 crore shares of face value of Rs 98 crore will be take up by IOC. The issue of premium, the primary reason behind the due diligence process, will be settled after consultation with HPL's three promoters- The Chatterjee Group (TCG), the Tatas and the West Bengal government.
As part of the deal, IOC may be offered the option of raising its stake further in future. The option of the state government relinquishing its stake can not be ruled out either. However, IOC is unlikely to take part in the polymer unit.
IOC's interest in the naphtha cracker complex is based on the synergy it has with its existing business of importing and refining crude, besides marketing and selling petroleum products from its own refineries and those of its associates.
The long-awaited participation of IOC into HPL will help the latter reduce its debt burden. The financial institutions are waiting for IOC's decision before deciding to restructure the Rs 4,000 crore debt.