MRPL plans to pick up majority stake in Spic Petro

25-Jul-05

SPIC Petrochemicals Ltd.(of the AC Muthiah group), since commencement of the project, has run into rough weather, and can be termed as one of India's most controversial projects of its time. SPIC Petro commenced implementation of the naphtha based PTA-PFY petrochemicals project at Kosappur near Chennai, in 1994. Alleging violation of their agreement, SPIC's joint venture partner Chennai Petroleum Corporation Ltd (CPCL), dragged SPIC and its promoters to court. The implementation of the project was stalled due to the legal battle that followed and shortage of funds. The 80,000 mtpa PFY plant is 75% complete, the 315,000 mtpa PTA plant is just 11% complete. This project now seems to be on the path to revival as Mangalore Refineries and Petrochemicals Limited (MRPL), the refining subsidiary of ONGC, has expressed plans to to acquire a controlling stake in SPIC. Wanting to pick up a majority stake and management control in SPIC Petro, MRPL is now awaiting an official letter from the ministry to begin due diligence. SPIC Petro currently needs Rs 1,598 crore, comprising Rs 1,173 crore debt and Rs 425 crore equity to complete the project. To complete the project under a restructuring package worked out by the financial institutions, the PTA-PFY project has been valued at US$559 million (Rs 2,403 crore). Valuation of the company has been carried out by independent consultants like Boston Consulting Group, PCI of UK and TCE Consulting Engineers, appointed by the financial institutions and banks including IDBI and ICICI.