PIB nod delay may hit GAIL's Haldia plan

The delay in getting the Public Investment Board's (PIB) approval may scuttle gas major GAIL India's investment plan in Haldia Petrochemical Ltd (HPL).

GAIL had proposed to invest Rs 332 crore to pick up about 16 per cent of the extended equity of HPL as part of a corporate debt restructuring (CDR) which sought fresh capital infusion of Rs 600 crore to revive it.

The Chatterjee Group (TCG), one of the existing promoters, was told to bring in Rs 268 crore via an initial public offer. As GAIL failed to bring in the fund, financial institutions (FIs), led by IDBI, turned the heat on TCG to bring in a part of Rs 268 crore for offering debt restructuring benefits.

TCG has promised to arrange Rs 143 crore for HPL, leaving Rs 457 crore to be brought by GAIL and an IPO. With GAIL intending to put Rs 332 crore, only Rs 125 crore is left for the IPO which violates Sebi norms.

According to the guideline for public issue by an unlisted company, the promoter must offer at least 10 per cent of the extended equity in case the company has a equity size that of HPL. Given that HPL's total equity is expected to be Rs 2,000 crore after fresh cash infusion and conversion of part of debt into equity, the IPO size must be Rs 200 crore.

However, there is no bar that HPL can not raise this amount to fulfill the Sebi norm and in that case the equity size would swell to Rs 2,075 crore. This may not be acceptable to the promoters who would not like to dilute the equity more than what CDR package required.

There is a view that Gail should bring in only Rs 200 crore as this would not require PIB approval and the CDR process could be finished soon. Moreover, in case, the size of the IPO would be bigger than Sebi's minimum requirement.

This arrangement may not be acceptable to GAIL which intends to take a bigger pie in the company which has turned around and started making profit.

HPL chairman Tarun Das has recently gone on record saying the entire CDR process would have to be completed by December 31, 2004 and an IPO was expected later this year.

He also mentioned that talks with Gail on investment plan would start after TCG put in Rs 143 crore by July 31 and initialise the package. Corporate observers said it was now left with FIs to take a final call and shape the funding for HPL's turnaround.