HPL to convert part of debt into equity

Haldia Petrochemicals Ltd (HPL) has decided to convert part of its loan in to equity, which will be picked up by a few major banks, including State Bank of India, ICICI Bank and IDBI. The decision, which was taken at HPL's last board meeting on March 27, also has another major ramification. It enables West Bengal's showpiece investment to dodge a mandatory reference to the Board for Industrial and Financial Reconstruction (BIFR) on grounds of it becoming a potentially sick company, whose net worth has been eroded by 50 per cent. At the board meeting, which was chaired by Industries Minister Partha Chatterjee, it was decided to convert Rs.128 crore of loan into equity which would convert into a shareholding of around 8 per cent for the banks. HPL's equity would get expanded from Rs.1,560 crore to Rs.1,688 crore upon this conversion. Its reserves had also been bolstered by the receipts of a fire insurance claim of Rs.106 crore, it was learnt. Deputy Chairman Purnendu Chatterjee also attended the meeting. HPL's loans are over Rs.2,500 crore. Sources said while indications were that HPL's naphtha-based plant had now stabilised, but it has had one of its worst years in 2011-12, when a depressed market combined with unstable operations, dented the bottomline severely. The company also saw two downgrades by ICRA during the year. HPL's losses are being estimated at around Rs.800 crore against a profit before tax of Rs.331 crore in 2010-11 on a net turnover of Rs.8,049 crore in 2011-12 against Rs.7,480 crore in 2010-11. It suffered 58 days' production loss on account of eight shutdowns due to the faulty implementation of an expansion programme. Keywords: Haldia Petrochemicals Ltd