The Hindu Business Line : Haldia Petro: Debt plan & profit hopes

THE net profit being eyed by the Haldia Petrochemicals Ltd (HPL) could well turn into a net loss, pegged as it is with the successful implementation of the debt recast plan.

HPL which reported a Rs 508 crore net loss in 2002-03 is getting all set to make its foray into the net profit zone with a Rs 50 crore net profit, riding on a Rs 120-crore saving in interest costs on account of the CDR.

But even if the CDR process gets off course, the company may well be on an upward trajectory, fired by an improved physical and financial performance.

Even as the company was pursuing its CDR with its battery of lenders, the fact remained that the entire debt recast CDR programme riveted on many conditions set by the lenders' consortium (led by IDBI) when the final letter was signed on February 12, 2004.

At least one of the deadlines has already been missed and many milestones are yet to be achieved.

The GAIL (India) Ltd board has reportedly okayed the proposal for picking up equity in HPL but the deadline of March 31, 2004 set by the CDR cell, for infusing the initial tranche of Rs 200 crore (by GAIL) has been missed. This would have been the first instalment of the Rs 600 crore of promoters fresh equity in HPL which was required to be brought in as per the debt recast plan.

The plan required that the PSU outfit would have to put in Rs 132 crore more within this fiscal year. The remaining portion of equity, of Rs 268 crore, is scheduled to be infused through a mix of an initial public offering and contribution from

The Chatterjee Petrochem (Mauritius) which together with the West Bengal Industrial Development Corporation and the Tatas hold stake in the Rs 1,153 crore equity of HPL now. Mr Chatterjee would also have to convert to equity the Rs 107 crore he had loaned to HPL two years ago.

Together with the proposed loan to equity conversion of Rs 140 crore by the lenders HPL's equity post-restructuring would be Rs 2,000 crore. The company management is planning to launch the IPO in the post-election capital market and would be well within the August deadline if they succeed in doing so.

On the debt side, while HPL had got an interest rate reprieve of only 10.5 per cent (it had asked for a rate of two per cent above government securities), it still translated into a saving of Rs120 crore on the Rs 540-crore outgo it suffers on account of interest costs. But this too is conditional on the individual lending institutions signing agreements to this effect with HPL. Company executives said that HPL is currently pursuing with all concerned for their individual sanction of the CDR package.

"However, even in the remote possibility of the entire CDR process falling through, the fact remained that HPL is now on the road to profitability," says a senior company official.

Their confidence stemmed from the fact that even if the Rs 120-crore projected interest cost savings failed to come through, in place of the Rs 50-crore net profit, HPL would end 2003-04 with a net loss of only Rs 70 crore compared with a Rs 518 crore net loss in 2002-03. Net sales were being estimated at Rs 3,600 crore in 2003-04 against Rs 2,957 crore in the previous fiscal.

This substantial reduction in loss, sources said comes entirely from HPL's improved operation and marketing although it takes on in the process the country's biggest private sector house.

This improved performance comes at an opportune time for HPL. The polymer industry is now on an upcycle and the improved margin on prices and good demand is expected to peak by 2005 analysts say. Indian domestic demand is expected to outstrip supply this year.

Naphtha remains one of HPL's major areas of concern and the company is trying to address this issue by developing more long-term contracts.

More Stories on : Performance | Petrochemicals

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page