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Haldia Petro may report to BIFR as ‘incipiently sick' company - 2012-02-27

While promoters are yet to resolve the ownership issues, blocking fresh capital infusion in Haldia Petrochemicals Ltd, West Bengal's showpiece industrial project is set to “report” to the Board for Industrial and Financial Reconstruction (BIFR) as an as a “incipiently (or potentially) sick company” by the end of this fiscal. According to sources in lending banks who were recently invited to a meeting by the State Government, as against a peak net worth of Rs 2,844 crore, the company has accumulated nearly Rs 1,550 crore loss till December 2011.

According to the existing rule, erosion of more than 50 per cent of the peak net-worth calls for “reporting” to BIFR. Having started the year with a net erosion of Rs 747 crore of the peak net worth, HPL added Rs 800-crore loss in the first three quarters of 2011-12 due to poor market conditions. This is inclusive of nearly Rs 200-crore loss on account of currency fluctuations.

Though the earnings before interest, depreciation and amortisation (EBIDTA) remain positive, the 21-day shutdown in January, owing to technical reasons, and the high interest liability due to a huge debt burden of Rs 4,000 crore will surely lead HPL to accumulate more losses in the fourth quarter of this fiscal.

Technically “potential sickness” is different from “sickness” – which makes it mandatory for the unit to undergo a revival plan under direct surveillance of BIFR – and should not lead to as much impact on flow of orders or bank finances. Banking sources, however, feel that high interest payment obligations and lack of capital infusion may keep straining HPL's balance-sheet in the days to come.

“The only available option before the company at this juncture so as to avoid reporting to BIFR is to convert part of its Rs 1,000-crore loan, previously disbursed under the CDR (Corporate debt restructuring) package, into equity. This would enhance the net worth of the company and offer a life-line to the joint sector company,” a source told Business Line.

However, no such option can be exercised until the ownership issues are resolved. Also, since HPL and its promoters failed to fulfil key obligations of the previous bail-out package, due to ownership-tangle emerging soon after the CDR package was approved in 2005, banks are not in a position to offer any fresh bail-out package to the company.

Source: Hindu Business Line