The Tata group is planning to pull out of the Rs 5,170 crore Haldia Petrochemicals project, its joint venture with the West Bengal government and the US-based Soros-Chatterjee group
The group is reportedly withdrawing as it is unhappy with the current equity structure, which does not provide it with much say or leverage. The current equity structure is not stable and the Tatas are not too keen to be a mute investor in the project, company sources said. While the Tatas hold around 14 per cent, WBIDC and Soros group hold around 43 per cent each .
The Tata group is also not too happy with the projects slow progress, the sources said. Also, the group is in disagreement with other promoters on several issues.
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The Tatas inclination to pull out has been strengthened by the management consultancy McKinseys report on the groups restructuring. McKinsey has advised the Tatas to exit from Haldia as the project does not fall within its core competence.
The Haldia project was proposed to be set up by the WBIDC and two Tata group companies, Tata Tea and Tata Chemicals. In 1993, IDBI estimated the project cost at Rs 4,721 crore. The two Tata companies later opted out of the project and two other Tata group companies, Telco and Tata Electric joined hands with WBIDC. In August 1994, WBIDC, the Tata group and Chatterjee Petrochemicals (a sister concern of the Soros Fund Management Co) signed a agreement for the project.
The foreign partner was roped in to meet the additional fund requirements.
According to the latest funding pattern, of the Rs 1,980 crore equity, WBIDC and Chatterjee Petrochemicals would contribute Rs 433 crore each, while the Tata Companies (Telco and TEC) would invest Rs 144 crore.
The company is also negotiating with Merrill Lynch and Morgan Stanley for Rs 100 crore overseas equity. The project is expected to achieve financial closure soon, with SBI Caps reportedly set to arrange Rs 1,000 crore through a syndicated loan.
Haldia Petrochemicals has raised Rs 100 crore at a coupon rate of 16.75 per cent and now proposes to raise another Rs 200 crore through the private placement of bonds.