Plans to launch HPL’s initial public offer in the next three years

The newly appointed managing director of Haldia Petrochemicals (HPL) seems keen to launch HPL’s initial public offer in the next three years. Talking to The Telegraph, Bhattacharyya said the company could return to profit by the end of this fiscal. The new MD expects to get all that is expected from the state and the central government by way of waiver of import duty on naphtha and the withdrawal of sales tax on the sale of motor spirit. So, next fiscal could be a year of profits. Bhattacharyya has lined up investments worth Rs 400-500 crore to achieve what he described as “quick wins”, which are projects yielding fast returns. “If we can do that in the next fiscal, the result will be showing in 2013-14. So by the end of 2014, we can think of IPO,” he said. The proceeds can be used for various purposes: HPL may think of mega expansion like putting up a refinery or investing in some value-added business. The company may also look to retire debt. The current long-term debt of HPL is Rs 2,000 crore, while equity is around Rs 1,900 crore. However, the problem lies in the debt service coverage ratio, which is 0.5 compared to a healthy level of 2. Simply put, HPL is earning a fourth of what it should to cover the debt. Ideally, it should generate twice as much cash. Bhattacharyya said the poor petrochemical market condition was the main culprit. The margins were wafer thin. He said the yield from the expanded capacity was also below expectations. The company head plans to introduce e-auction to maximise sales and purchases.
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