HPL’s financial restructuring on the anvil

Haldia Petrochemicals Limited (HPL) is in the final stages of discussion with IDBI and other banks and FIs on its financial restructuring. P...

Haldia Petrochemicals Limited (HPL) is in the final stages of discussion with IDBI and other banks and FIs on its financial restructuring. Post financial recast, HPL plans to bring down its debt equity ratio (which at present stands at 4:1) and also its huge interest burden. GAIL’s equity participation in HPL also depends on this financial restructuring as the state-owned gas company has categorically stated that scaling down the debt equity ratio is a major precondition for its equity participation.

Talking to reporters, HPL chairman Tarun Das said that the company was discussing with FIs a restructuring package and the process was in the last lap. Das, however, declined to discuss more details of the restructuring package. According to Das, HPL is in talks only with GAIL for equity participation.

GAIL, HPL in marketing alliance

NEW DELHI: GAIL and HPL entered into a product exchange agreement to strengthen the marketing alliance between the two companies. ‘‘The alliance is aimed at achieving cost economies of scale and efficient logistics and marketing network management,’’ GAIL’s CMD Proshanto Banerjee said. While GAIL would market 35,000 tonne of HPL’s polypropylene in northern and western India markets, HPL would take 35,000 tonne of pentane that could be used as alternate fuel feedstock for its petrochemical unit. Further, the two have signed a product swap agreement for 40,000 tonne of polyethylene.

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Meanwhile, according to GAIL CMD Proshanto Banerjee, ‘‘We are very clear in our minds that (equity) investment in HPL will happen only after a comprehensive financial restructuring that factors the cyclical nature of the petrochemical business.’’ GAIL has earlier planned to invest around Rs 200 crore of equity (10 per cent). According to estimates of GAIL, HPL would need fresh equity to the tune of Rs 500 crore to make the loss-making company viable. Banerjee further clarified that GAIL’s Rs 200 crore investment in HPL is subject to lenders agreeing to lowering interest rates, writing off a part of debt, moratorium of interest payment and conversion of part debt into equity.

HPL vice chairman Purnendu Chatterjee evaded queries if promoters were ready to chip in additional equity needed even after GAIL’s investment. The Chatterjee Group and West Bengal government hold 43 per cent a piece in HPL, while the remaining is with Tatas. Tatas have also expressed their willingness to step out of the project. Chatterjee said gross revenues of HPL (net of taxes and depreciation) has jumped from Rs 85 crore in 2001-02 to Rs 340 crore in 2002-03. ‘‘We hope to do even better this fiscal,’’ he said. The company shelled out Rs 500 crore annually on interest on Rs 4,480 crore debt.

Gail officials said HPL would need a minimum of Rs 500 crore as additional equity besides lenders tightening their belt to bring down the debt-equity ratio from 4:1 to 2:1.

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