The ailing Haldia Petrochemicals Ltd’s plan to go for a rights issue at Rs 25.10 a share, to raise much needed finances, may crash-land.

Strange formula While co-promoter The Chatterjee Group objected to the decision, in view of the ongoing ownership dispute, the minority stake holder in the project, Indian Oil Corporation, too expressed its reservation to pricing of the issue.

In a board meeting held on December 24, 2013, the State Government, with the support of lenders, cleared a proposal for issue of 51.2 crore shares on rights basis against a total equity of 168.79 crore shares of face value of Rs 10 each.

The pricing of issue was decided based on an earlier State bid to sell its 40 per cent stake, including disputed 9 per cent stake, through auction.

IOC, which currently holds 9 per cent stake in HPL, agreed to pay Rs 25.10 a share, to gain management control over the project against TCG’s 41 per cent stake.

Clearly, the price offered by IOC included a control premium. But, for some strange reasons, West Bengal Government took it as the ‘discovered price’ of HPL shares which has a negative book value.

IOC disagrees IOC is not comfortable with the decision. The company sources felt that the share auction held in October has little relevance following the recent Supreme Court verdict allowing TCG to go for international arbitration in Paris to settle the dispute over 9 per cent stake currently held by the State Government.

A favourable verdict in Paris may catapult TCG in the driving seat with 51 per cent majority.

“There was no reason to link the share auction round, which is now stayed by the court of law, with the rights issue. And, why should IOC board agree to pay such a high price for minority stake in a company that has eroded its net worth and is facing an uncertain future?” questioned a source close to the development.

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