“We have again last week written to the promoters renewing our offer of becoming the fourth equity partner in the $1.1 billion project,” highly placed IOC sources said.
As per the IOC proposal, the state-run refiner wants 26 per cent shareholding with management control. Its Rs 468 crore investment would be by way of infusing fresh capital in the company, which is faced with an equity shortfall of Rs 969 crore, sources said.
Besides, IOC wants HPL to source its entire naphtha requirement from its refineries, sources said, adding IOC’s investment would help bring down the adverse debt-equity ratio of 4.6:1.
HPL has a debt of Rs 4,500 crore and equity of Rs 1,200 crore. West Bengal government and Soros-Chatterjee Group own 43 per cent each in HPL. The rest is owned by Tatas.
HPL originally conceived at a debt equity ratio of 3:2 is now actually saddled with a high cost debt burden of over Rs 4,500 crore, resulting in a high debt equity ratio of 4.6:1.
Sources said talks between IOC and HPL promoters have been going on for a year now. Meanwhile, state-run gas transportation company Gas Authority of India Ltd (GAIL) too has evinced interest in taking 10 per cent non-controlling stake in HPL.
IOC wants Rs 725 crore capatilised losses to be written off either by the promoters and lenders upfront or through fresh issue of redeemable preference shares from the existing promoters or lenders, bearing dividend at the rate of one per cent and redeemable after 20 years, sources said.
It has suggested that lenders should write off at least apart of their accumulated interest with only the balance being converted into long-term preference shares.
The IOC proposal seeks conversion of a part of the principal amount of the loans from the FIs into equity capital which is also necessary to improve the debt-equity structure and reduce the interest burden in the future, sources said.
As far as short-term and overdue liabilities are concerned, through IOC’s equity injection and additional appropriate financial instrument, some means can be found to address Haldia’s fund requirements, they added.
Talks to bring in an additional investor began a year ago in a bid to cut the company’s debt burden. It is funded by equity of Rs 1,979 crore. HPL sponsors’ equity, amounting to Rs 1,010 crore and constituting 51 per cent of the share capacity, has been fully paid by the three promoters - WBIDC and Chatterjee Group.