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New Delhi, June 17: : Investments worth Rs 300 crore by a number of provident funds in Hindustan Organic Chemicals Ltd (HOCL) is holding up its privatisation. The government is preparing a financial restructuring package for the loss-making company so that its balancesheet can be cleaned up and bidders can submit financial bids.
Disinvestment secretary Pradip Baijal told FE, “the government is in the process of preparing a revival package for HOCL. If a decision is taken on the package, we will then call financial bids for the company,” adding the company will be privatised in three months.
The government is offloading 32.61 per cent of its 58.6 per cent equity in HOCL. Bidders include Vam Organic, Deepak Chemicals & Fertilisers, Herdillia Chemicals, Atul Ltd and the public sector RCF.
Official sources said what is holding up its sale is not just losses but also the Rs 300 crore investments by various provident funds, in the forms of deposits, bonds, etc. They also pointed out that the annual debt servicing liability of HOCL is around Rs 50 crore, and has an operating loss of around Rs 5 crore. Unless a substantial revival scheme is cleared by the government, no one is likely to bid for this loss-making PSU, they added.
Government officials pointed out that the reasons for HOCL’s unsatisfactory performance include adverse market conditions, high cost of inputs, severe competition, high wage and the public sector culture.
AF Ferguson is advising the government on its privatisation.
HOCL has incurred a Rs 39.06 crore loss during 2000-01, much lower than the Rs 105.02 crore loss reported during the previous fiscal.
With its plants at Rasayani, near Mumbai and Kochi, HOCL manufactures petrochemicals and basic organic chemicals.
Incorporated in 1960, to manufacture basic chemicals and chemical intermediaries, it took HOCL 10 years to commence production. While the phase-I plants were completed by 1974-75 and phase-II by 1981, the phase-III was completed in 1994.
One of the objectives of setting up the HOCL plant at Rasayani was to develop the backward areas through creating employment opportunities directly and indirectly through downstream industries. Dilution of commercial principles by social obligations is said to have taken a toll on its efficiency and performance.
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