The other bidders for IPCL are Reliance Industries, Mitsubishi Chemicals (who are already through with their due diligence) and Dow Chemicals. IOC was initially keen on going it alone but this proposal was rejected by the committee of secretaries on the grounds that the very objective of privatisation would be defeated.

The Fortune 500 company subsequently kicked off talks with the other bidders on the possibility of a joint buyout and zeroed in on the Soros group. It now remains to be seen what price the duo will offer for the Centre's stake which will be followed by the mandatory 20 per cent open offer to other shareholders of IPCL. Effectively, this could translate into an outgo of over Rs 2,000 crore.

Experts believe that Indian OC (now with Soros) is best equipped to team up with IPCL as a strategic ally as it would cater to the latter's requirement of feedstock. The two have only recently entered into a memorandum of understanding to work jointly in petrochemical and refinery projects both here and abroad. A beginning has already been made in Panipat where IOC has planned a petrochemicals complex while similar plans are on at Nagapattinam in Tamil Nadu. The two PSUs are also exploring the option of setting up a refinery in the middle-east.

IOC recently agreed to cater to naptha imports on behalf of IPCL for its Baroda complex. The two PSUs have signed a 10-year pact for the purpose and observers say this will translate into significant cost savings for IPCL.

"It is a good business deal which clearly indicates that PSUs can work in tandem instead of merely competing with each other," sources say. Prior to this agreement, IPCL would import around 2.4 lakh tonnes of naphtha on its own. This, in turn, constituted 40 per cent of its Baroda plant's needs.

In the future, this will be increased to 4 lakh tonnes or 70 per cent of the total naphtha requirement of the complex. The greater need will be a fallout of capacity expansion at Baroda and now with IOC stepping into the picture, experts say IPCL will stand to save over Rs 1,000 per tonne of naphtha imported.

It was more than five years ago when a working group presented a proposal to the ministry of petroleum and natural gas suggesting a strategic alliance between IOC's Koyali refinery and IPCL's Baroda complex. However, there was some resistance to the idea and unconfirmed reports indicated that IOC was not ready to accept it as the Gujarat refinery was "its jewel in the crown".

INSIGHT:

Dow Chem likely to quote Rs 200 for IPCL share

Dow Chemicals is believed to have worked out an estimate of around Rs 200 per share of IPCL. While this could not be confirmed from company officials, sources close to the deal say that Dow could now end up being the hottest candidate for buying the Centre's 25 per cent stake in IPCL. It now remains to be seen what the IOC-Soros combine could jointly offer in a race where the other bidders are not expected to quote over Rs 170 per share.

At one stage, the market was agog with rumours that Dow had dropped out of the race following its worldwide merger with Union Carbide. However, the estimate it has in mind is a clear indication that the company is quite keen on becoming a strategic partner in IPCL.

-- Jyotsna Bhatnagar & Murali Gopalan