So keen was Ambani that he had offered to come down to the industry hungry state in 2006 for HPL and also invest further in refinery projects in the state, according to a former minister.
A deeper look into the once signature project of the state government explains how it makes sense to be in the hunt for HPL. It has the ability to produce world-class products, with a capacity of producing 3.5 million tonnes (mt) of polymer a year. It has a little over 400 acres of idle land.
Prior to the ownership battle, the company had readied a plan to create downstream projects in the facility. According to a real estate developer, each acre of that land, near to Haldia port as well, could fetch Rs 1-1.5 crore easily. For 400 acres that swells to Rs 600 crore. At a time when land acquisition is the biggest problem, this would be a big bonus for an investor. IOC, one of the five bidders for HPL, already has an 8.9 per cent stake and would be the most keen among its public sector peers to win the price bid. IOC’s refinery in the state is adjacent to the plant in HPL; it supplies naphtha (raw material) to HPL.
Then there is Ambani, ready with cash and cash equivalent of around Rs 80,000 crore. His RIL has been itching to make a grand entry into the eastern part of the country and HPL would be the best vehicle. RIL has planned to increase its petrochemical capacity from 15 mt a year (mtpa) to 25 mtpa and has undertaken the single largest expansion in the petrochemicals sector. A healthy 3.5 mt of capacity with option of expansion would boost Ambani’s plans.
Yet, the financials of HPL are not rosy. Net worth had eroded from Rs 2,347 crore in FY10 to Rs 2,097 crore in FY11. This marked the beginning of its downhill journey. With intermittent plant shutdowns due to inefficiency, the net worth was Rs 500 crore as on March 31 this year. It is a fit case for reference to the Board for Industrial and Financial Reconstruction but the company’s directors haven’t done so.
The former managing director of HPL, Partha Bhattacharyya, has said time and again how a plan was ready for creating downstream projects.
“It could not get started due to inadequate funds from banks and the battle between the promoters,” he had said. What made Ambani’s intent more clear was the recent proposal for open auction via multiple rounds of bidding in HPL. According to a Deutsche Bank AG report, issued on March 11, RIL would invest $8 billion in petrochemicals. However the Bengal government has opted for the traditional closed bidding, where sealed bids will be given.
Human resources have also gone from HPL to RIL. According to some of the senior plant managers at the HPL plant, many senior engineers who had left HPL later joined RIL.
One big surprise was billionaire Agarwal’s interest in HPL, through Cairn India’s formal expression of interest. Which means the contest story is far from over.