The beleaguered Haldia Petrochemicals Ltd is considering a public offering of shares to improve debt-equity ratio as demanded by the project's lenders.
Purnendu Chatterjee, the principal promoter who owns 43 per cent of HPL's shares, is also expected to underwrite the issue, which means, he would have to buy out the unsubscribed portion of the IPO, if any.
Asked whether a public offering of shares was being considered, Chatterjee told Business Standard: "It is one of the options (being weighed)."
HPL's lenders have asked the promoters to invest Rs 600 crore (Rs 6 billion) as a condition for reducing the interest rate on and extending the maturity of its debts approaching Rs 4,500 crore (Rs 45 billion).
Two oil sector bellwethers, Indian Oil Corporation and GAIL India Ltd have offered to invest in HPL, besides Chatterjee. The proposal sent by the promoters to the CDR (corporate debt restructuring) Forum, where the HPL's case has been referred now, however, speaks about fresh capital infusion of Rs 468 crore.
While GAIL has committed Rs 200 crore (Rs 2 billion), the rest was to be arranged by TCG. The two other promoters of HPL -- the government of West Bengal and the Tatas -- have refused to invest further.
By underwriting the IPO, TCG will be able to meet commitment for cash without any significant fresh exposure in HPL. The company has previously considered going public, but unfavourable market conditions forced it to borrow.
Though the size of the proposed issue will be decided in consultation with lenders, observers say, HPL will raise a minimum of Rs 300-400 crore (Rs 3-4 billion) if it goes public.
Raising that amount should not be difficult given the strength in the equity market now and the upturn in the petrochemical cycle, which has significantly boosted the performance of HPL.
Not only will the IPO help HPL ease its financial difficulties, it may even offer an exit to the Tatas. Tata Sons, which holds a minority stake of 14 per cent, had earlier said it wanted to sell its shares in the company.
While offering to meet HPL's fund needs, GAIL and IOC had indicated to take over total control of the company's management.
But Chatterjee appears to be as unwilling to give up the reins of the company as to fork out the amount demanded by lenders.
If he could raise Rs 300-400 crore through an IPO, he would have the debts restructured without having to cede control of the company. HPL had an accumulated loss of Rs 1,057 crore (Rs 10.57 billion) at the close of fiscal 2003, due to high interest cost.
If the lenders agree a cut in interest rate in retrospective effect, it will pare HPL's accumulated loss, besides improving its financials moving ahead.
