Will Chatterjee take over the Government's 36% stake in HPL?

21-Apr-05

Reluctant to let Haldia Petrochem Ltd.(HPL) fall into the hands of the public sector, Purnendu Chatterjee has for a long time been insisting on gaining full control of HPL. His wait seems to be at an end - the Bengal government has proposed to Chatterjee to buy its shareholding to the tune of 36% stake in HPL. HPL has a paid-up capital of Rs 1,410 crore, which is shared among the government, Chatterjee (43%), institutional investors (17.5%) and the Tatas (3.5%). The West Bengal government has initiated talks with the Chatterjee Group (TCG) to sell its entire stake in Haldia Petrochemicals. The cost to Chatterjee will be as follows: TCG has been asked to pay Rs 30/share, at a premium of Rs 20/share, implying that Chatterjee, the private partner in the company, will have to pay Rs 1,560 crore for 36% stakeholding. The purchase will make him the single largest shareholder with management control. However, failure on his part to put up the money, will result in the government offering the stake to some other entity, most likely Indian Oil Corporation. IOC had earlier made a proposal to invest in HPL, but the management control that IOC desired, was not acceptable to Chatterjee. After Chatterjee's opposition, IOC lowered its investment offer to 7.5% @ Rs 150 crore, for which shares have to still be allotted. HPL is a good acquisition for IOC and marks an opportunity for forward integration.