HPL awaits nod for product swapping terms in next board meeting

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SME Times News Bureau | 06 Aug, 2012
In a bid to arrange a temporary financing option, cash-strapped Haldia Petrochemicals Ltd (HPL), the second-largest maker of polyethylene in India, is awaiting a nod from its board on terms of product swapping arrangement with an international company.

The international firm became a single bidder to the expression of interest (EoI), which HPL, co-promoted by the West Bengal government and The Chatterjee Group (TCG), had floated.

If the board approves the terms of swapping arrangement with the bidder in the next meeting, then the company, which has a naphtha-based plant at Haldia, is expected to start the process from the end of September this year.

"We are holding talks with the company. Board meeting will be on Aug 11. We will be putting it before the board then," HPL managing director Sumantra Choudhury told reporters here Saturday.

In the swapping arrangement, the bidder will be required to supply naphtha while taking back the processed products.

This arrangement will help the debt-ridden company operate its plant at the fully capacity level as well as finance some of its working capital.

"This is not a permanent arrangement... this will be an interim relief," Choudhury stated.

HPL operated its plant at 100/140 tonnes per hour (TPH) in June and it was increased to 200 TPH from July 7 with special financial arrangement.

"From Aug 1 it was increased to 240 TPH. Capacity utilization stood at 91 percent," the managing director informed.

He said the company also generated cash profit in July this year and expected to continue the trend in August on the back of conducive business environment and product margins.

"However, with recent cash loss of about Rs.684 crore, debt servicing cannot be met from this earnings," he added.

The company currently has an accumulated loss of more than Rs.1,200 billion against a peak net worth of Rs.28.44 billion, while the total debt is around Rs.37 billion.