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Tuesday’s Supreme Court decision in the Haldia Petrochemicals (HPL) case has put a question mark on lenders extending a helping hand to the cash-strapped major.
As already reported, the SC refused to stop The Chatterjee Group (TCG), principal co-promoter, from taking its case against the state government to the international arbitration tribunal in Paris. The government is the other big co-promoter and was in the process of divesting its 40 per cent stake. Some of the shares in question are the subject matter of what TCG wishes to put for arbitration in Paris.
Financially stricken HPL has been seeking working capital from its lenders. This latest order is likely to delay any resolution of these matters and even push the company to formally notify the Board for Industrial and Financial Reconstruction (BIFR). Owing to partial erosion of its net worth, the HPL management had already made a preliminary notification to BIFR; lenders were being persuaded to put in fresh funds.
Partha Chatterjee, chairman of HPL and the state’s industries minister, has been asking for working capital of Rs 1,000 crore, to primarily be used for buying naphtha, the key raw material.
“We always want to see HPL doing well but inordinate delays are hurting the company. IOC's (Indian Oil Corporation’s) selection as a bidder for the government's stake had given hope to everybody but the latest development would bring things back to Square One,” said a banker who represents part of the consortium of lenders to HPL. State Bank of India, IDBI and Punjab National Bank are the leading lenders.
According to this person, TCG chief Purnendu Chatterjee is dragging on the matter for no clear reason, creating legal hurdles. “We have said it many times that the promoters should also bring in some funds and we would accordingly do it from our end but things haven't moved in a positive direction,” he said, adding that only completion of divestment would lead to release of fresh funds.
TCG says it is ready to offer help of Rs 500 crore but a rider on management control is attached. The interest payout on the existing loans from banks is also hurting. Of the Rs 250 crore HPL had got as a loan in the past six months from the state government and banks, about Rs 200 crore was spent on servicing old debt, leaving little for operational use over a longer term.
HPL’s net worth had eroded from Rs 2,347 crore in FY10 to Rs 2,097 crore in FY11. With intermittent plant shutdowns due to inefficiency, the net worth was only around Rs 500 crore as on March 31, 2013.
The promoters have been at loggerheads over management control of the company and the disputed 155 million shares. The Paris court would decide which promoter gets management control.
TCG already has close to 41 per cent in HPL and will be in a majority if the disputed shares are decided in its favour. Otherwise, IOC would be in a position to claim management control, with the state's 40 per cent stake coupled to its existing near-nine per cent stake.
