Financial Daily from THE HINDU group of publications
Friday, Jun 28, 2002
Mergers & Acquisitions
Corporate - Mergers & Acquisitions
Feelers to IOC on MRPL stake
Balaji C. Mouli
NEW DELHI, June 27
INDIAN Oil Corporation (IOC) has been sounded out informally by the current management of Mangalore Refineries and Petrochemicals Ltd (MRPL) to consider the prospect of taking over management control of the 9-million tonne refinery.
The refinery is a joint venture between the AV Birla Group and Hindustan Petroleum Corporation Ltd (HPCL), with both holding 37.5 per cent equity apiece. The Birlas have been seeking to exit the venture for well over a year.
``The current management (of MRPL) is interested...We have told them that we would like to commence due diligence of the company,'' a senior IOC official told Business Line.
Oil and Natural Gas Corporation, far from being a ring-side spectator, had talks about a month ago with IOC to jointly look at the possibility of taking management control of MRPL. According to a senior ONGC official, there has been no development since then.
Interestingly, IOC's move comes at a time when Reliance Industries Ltd has reached an advanced stage of negotiations to take management control of MRPL with both the partners agreeing to the financial restructuring of the debt-ridden refinery.
The deal had gathered steam around the first week of April when HPCL was agreeable to the induction of a strategic partner provided the latter was willing to bring in Rs 1,500 crore into the company.
As per the package involving fresh issue of shares and conversion of debt to equity, both HPCL and Birla's stake would drop to less than 10 per cent, with stake of financial institutions (FIs) rising marginally.
In the process, the FIs would also have to sacrifice a part of their returns.
The company has been burdened with a high-cost debt of over Rs 6,000 crore, accumulated when it plumped in for a debt-driven financing for the second stage of the project, when the refining capacity was ramped up from three million tonnes per annum to 9 million tonnes per annum.
It will be interesting to see the approach of financial institutions' towards a bail-out package for the beleaguered refinery if a public sector company were to take over management control.
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