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Good times are back at Haldia Petrochemicals. The company has wiped out its accumulated losses in 2016-17 and started the new fiscal with a cash balance of nearly 4,100 crore.
According to sources, the cash balance could have been higher had HPL not invested 250-300 crore in a trading arm in Singapore last year.
The wheels of fortune started moving strongly in HPL’s favour since 2015-16 when the ownership battle was finally resolved and HPL ended the year in profit. But that was not sufficient to wipe out the accumulated losses of 1100-1200 crore.
The balance-sheet for 2016-17 is yet to be finalised. But sources say the company posted approximately 3,600 crore earnings before interest, taxes, depreciation and amortization (EBIDTA). Ideally, this should be sufficient to post a fat net profit and clean the slate.
Last year, the company opted for a mammoth corporate restructuring by merging the subsidiaries with self, thereby pushing the net worth a few times. With loans already restructured as part of the SBI deal that was crucial to bring the company out of the crisis, the company seems to beon a far more solid footing now than ever.
HPL Chairman Purnendu Chatterjee refused to comment. But, sources say with the company comfortable on cash and liabilities optimised, it is time for HPL to go for fresh investments in capacities ensuring more gainful use of money that investing in AA-rated Income Funds.
Chatterjee, it is learnt, is considering many options, including investing in a refining capacity. The country’s only naphtha-based petrochemicals plant was set up as a downstream of the Haldia refinery of IndianOil.
With time, however, IndianOil entered the petrochemicals business and, emerged a competitor to HPL. The State-owned oil marketing major also tried to acquire HPL and still holds a minority stake in the petrochemicals.
Refining is, therefore, a logical choice for HPL. Purnendu promised to do the same through his $2.5 billion ‘The Chatterjee Group’ during the Bengal investment summit in 2016. But, it is a million-dollar question if he would go for it immediately for various reasons, including the requirement of fresh land.
Market sources say he is keen to invest in value added capacities in the existing HPL project site to widen the product basket of the company. And, all such investments should be made through internal accruals and debt.
The idea is to limit the capital requirement so as to stay away from the equity market. Just out of a decade-long ownership battle, Purnendu is reportedly keen to complete the acquisition of the State government’s 35 per cent stake, as was agreed in the 2015 pact. He now holds 48 per cent majority stake in HPL.
“Leave alone stake-sale (as was reported in a section of media), he is not even keen on IPO,” a source said. TCG, in the meantime, acquired the majority stake in HPL’s neighbour MCC PTA India (MCPI) from the Tokyo-headquartered Mitsubishi Chemical Corporation (MCC) in Tokyo at an undisclosed sum.
PTA or purified terephthalic acid is mostly used in producing polyester fibres used in textiles industry. MCC sold the majority stake to restructure its petrochemicals business in India and China. Market sources say TCG cut the deal cheap.
The group controlled TCG Lifesciences Private Limited is a contract research services company in the area of early drug discovery and development. The company employs over 800 scientists and has presence in the US, Europe and Japan.
TCG is also into premium commercial real estate sector with properties spread over Kolkata, Gurgaon, Pune, Bangalore, Mumbai, Chennai. According to real estate consultants, TCG manages nearly 7 million square feet space with an estimated rental earning of 700-750 crore.
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