Mumbai, June 7: The state-run Indian Petrochemicals Corporation (IPCL) plans to prepare a paper that will address the issue of bringing down the centre's stake in it to 26 per cent. The move follows the finance minister's announcement in the budget that the centre's stake in non-strategic state-run units will be reduced to that level. Work on the paper has already started. The paper is expected to be ready in the next few weeks."IPCL is a non-strategic PSU as per the definition of the Disinvestment Commission, and the issue of paring the centre's stake boils down to timing," sources said. The government's holding in the corporation is around 60 per cent now and will be down to 51 per cent once IPCL is through with its $175-million foreign currency convertible bond (FCCB) plan in 2002.The convertible bonds will, however, have no bearing on IPCL's disinvestment plan, which could "actually begin right away." Observers believe that it is in the interests of the corporation to have a reduced governmentholding as it will impart greater flexibility into its operations.The paper, to be sent to the ministry of chemicals and fertilisers, is expected to discuss various modes of divesting the centre's holding and suggest the most ideal route which will ensure profitability of the corporation in the long run. One option will be to offer the stake to a clutch of investors, preferably financial institutions like the Unit Trust of India and the Industrial Development Bank of India.The other would, of course, involve giving a bulk 25 per cent to a "strategic partner" as suggested by the Disinvestment Commission. IPCL would, in its paper, seek further details on the nature of this partner who will also be entrusted with management control. "The implications of this teaming up on the corporation will have to be clearly spelt out," sources said.The Disinvestment Commission has apparently stated in its report that such acquisition by the strategic partner should not let the latter become a monopoly in thepetrochemicals sector. This would automatically preclude some key players in the private sector from throwing their hat into the ring. However, experts say that there will be many multinationals who would be keen to partner IPCL, and speculation is rife that some have already indicated their interest to the government. While the budget has clearly stated that government holding will be reduced to 26 per cent in non-strategic units like IPCL, the key issue is the timetable for such divestment. Given the state of the local and foreign markets, much work needs to be done before, sources said.As part of its endeavour to compete effectively in the petrochemicals sector, IPCL is keen on picking up a stake in any of the new refineries proposed to be commissioned during the next five years. This will ensure supply of feedstock for its plants.The east coast refinery, promoted by the Indian Oil Corporation and Kuwait Petroleum Corporation, has just received approval from the Public Investment Board, and it islikely that IPCL will seek a stake here. The other options that could be considered will be Bharat Petroleum Corporation's Bina refinery and Hindustan Petroleum Corporation's Punjab facility. All the refineries are expected to be commissioned by 2002-03.A recent research report on IPCL says that it has the benefit of capital cost as capacity has been created at a low cost. This results in a high return on average asset employed. The corporation also has a strong managerial and technical team to steer its operations, the report adds. The management team has been very successful in its strategy to build up capacity in a phased manner to consolidate its position in a liberalised business environment.
