HPL may hike IPO size

The new diktat from the Centre asking public oil sector companies to curb diversification plans is unlikely to have any impact on Haldia Petrochemicals Ltd, which is expecting an equity participation from GAIL India.

The gas major had intended to invest Rs 332 crore (Rs 3.22 billion) as per the corporate debt restructuring package, which called for fresh capital infusion of Rs 600 crore (Rs 6 billion).

However, the promoters of HPL brought down their requirement from GAIL to Rs 150 crore (Rs 1.5 billion) at a later stage and planned to make an initial public offer to raise fund.

Market sources said HPL was likely to go for a bigger IPO of Rs 350-400 crore (Rs 3.5-4 billion) to make up the shortfall that may arise if ministry of petroleum and natural gas nixes GAIL's plan to invest in the company. The Chatterjee Group, one of the HPL promoters, has already arranged Rs 143 crore (Rs 1.43 billion) in the company.

HPL has made a remarkable turnaround in the last financial year, with over Rs 100 crore (Rs 1 billion) profit after tax, thanks to the upturn in the petrochemical cycle and reduction in interest rate on rupee term loan. This year HPL's PAT could soar over Rs 200 crore (Rs 2 billion).

"Backed by strong performance, the company is now looking for a premium in its book built issue. This way it could make up the shortfall and also reduce dilution of equity to an extent," sources said adding the draft prospectus would be filed with Sebi by middle of October and the issue would hit the market by end November.

GAIL has, however, not left hope of picking a small pie in HPL even as the PSU favoured a bigger role in the West Bengal-based petrochemical company.

The West Bengal government, a promoter in HPL, is also in favour of an oil PSU picking up stake in the company. With the Left backing the UPA government at the Centre, GAIL's chances certainly have not disappeared completely.

GAIL's plan has hit a roadblock since its investment in HPL would not entail management control. With Rs 150 crore investment, GAIL would have got around 7.5 per cent equity in HPL. Earlier stake sale talks with Indian Oil Corporation had broken down on the same ground that the navaratna PSU demanded control over HPL management.

Analysts said the development could be beneficial to HPL at present since GAIL intended to take equity at par while it could sell shares at a premium through the IPO.