In a major financial restructuring, the foreign equity stake in the controversial Haldia Petro-chemicals project is being enhanced from Rs 432.86 crore, or 21.9 per cent, to Rs 1,401.86 crore, or 70.84 per cent of the total paid-up capital of Rs 1,979 crore.
As part of the restructuring, 48.97 per cent of the foreign equity, valued at Rs 969 crore ($269.17 million) will be raised through a combination of three instruments: private placement of foreign currency convertible bonds, foreign currency bonds repayable from an initial public offering, and either a global depository receipts or an American depository receipts issue.
The company will privately place equity worth $100 million to international investors with an option to issue GDRs/ADRs in lieu of equity. These will be issued at a premium which will be decided after detailed negotiations.
Haldia Petrochemicals will also privately place foreign currency convertible bonds worth $100 million, which will be converted at the time of the initial public offer. The bonds will also incorporate an appropriate premium at the point of conversion. Also on the anvil is the issue of foreign currency bonds worth $100 million, repayable from an initial public offering.
Although the funds mentioned by the company aggregate $300 million, the company has promised to ensure that the total collection through the three instruments does not exceed $269.17 million or Rs 969 crore. The application for the restructured equity was cleared by the Foreign Investment Promotion Board a few days ago.
The company has decided to raise the foreign equity level in the project after realising that the investment climate is unsuitable for a public issue to raise the remaining portion of new equity in the project.
The existing foreign equity in the project, worth Rs 433 crore, is held by the Soros-Chatterji group. This will not be disturbed by the issue of fresh equity. The other promoters of the project, the Tata group, will invest Rs 144 crore and West Bengal Industrial Development Corp will invest Rs 433 crore. Of the total equity of Rs 1,979 crore, WBIDC, the Chatterji-Soros group and the Tatas are investing Rs 1,010 crore in the ratio of 3: 3:1.
In its fresh application to the government, the company stated that it has had to go in for enhancement of foreign equity because of problems in raising equity from the domestic market. The application states, It would be appropriate to take note of the present slump in the primary market and the fact that a large initial public offering of Rs 969 crore of the equity holding of the project is not likely to be feasible.
The company had been granted foreign collaboration approval, under which the approved foreign equity participation was up to 21.9 per cent through Chatterji Petrochem (Mauritius) Ltd, part of the Soros-Chatterji group.
The controversial project has encountered several setbacks in the past 14 years, with various promoters joining and then withdrawing from it. The over-Rs 5170 crore project includes a naphtha cracker and has downstream facilities to manufacture a range of products, including ethylene, polyethylene and polypropylene.
