Bengal wants IOC to be ready to buy Haldia

New Delhi, Nov 13 | Updated: Nov 14 2005, 05:30am hrs
West Bengal has sought a firm commitment from the Centre that Indian Oil Corporation (IOC) will come forward, when required with necessary funds, to purchase shares and take management control of Haldia Petrochemicals Ltd (HPL). State chief minister Buddhadeb Bhattacharjee met Prime Minister Manmohan Singh on October 24 to facilitate IOCs induction as HPLs new partner.

A note handed over by Mr Bhattacharjee to the PM said West Bengal was worried given the recent attempts by The Chatterjee Group (TCG) to make HPL borrow further to participate in the acquisition of $ 8.4 billion Basell NV. Since HPL has just come out of a financial crisis, this would have adversely affected the company, it said.

The state government is very keen to bring IOC into HPL, and in that event, is willing to exit in favour of IOC, the note said.

At present, state-owned West Bengal Industrial Development Corp (WBIDC) is the largest investor in HPL with 54% (after picking up 11% from the Tatas).

TCG, Mauritius holds 43%, with Tatas holding the balance 3%. IOC was offered 7.5% in the company (150 million shares) by the state. However, the sale of shares was opposed by TCG and a petition was moved before the Company Law Board (CLB) against the state, IOC and HPL. The note said that there was a possibility that CLB may ask one of the parties to buy out the other resulting in an auction. If such a proposal is put forth by CLB, the state was prepared to buy out the TCG holdings, it added.

The state has said it may also be very difficult for HPL with TCG at the helm to withstand competition in a downcycle, against IOC and Reliance Industries Ltd. IOC is setting up a new plant at Paradeep and petrochemical capacities at Panipat. RIL too is augmenting capacity in its plant in Gujarat.

It is in this context that the state minister of industries and commerce met union petroleum minister Mani Shankar Aiyar on September 14. The note submitted to the PM said Mr Aiyar agreed that if required, IOC would be prepared to buy WBIDCs stake in HPL immediately, and after the state has purchased TCGs holding, to purchase that too. The valuation agreed to between the state and TCG in March was approximately Rs 29 per share. At this rate, the cost of 690 million TCG shares will be in the range of Rs 2,000 crore.