IOC withdraws bid for Bengal's ailing Haldia Petrochem

IndianOil Corp, the largest of India's three state-owned oil marketing companies, has scrapped its decision to fully take over West Bengal's ailing Haldia Petrochemicals Ltd, worried about the endless legal tussle between the existing owners, the West Bengal government and The Chatterjee Group (TCG) controlled by Purnendu Chatterjee, which owns 41 per cent of Haldia Petrochem.

IndianOil has informed the state government led by Mamata Banerjee of the Trinamool Congress that it has decided not to go ahead with the deal to buy the government's 40-per cent stake in what was once considered West Bengal's flagship oil refinery before it fell into disarray.

Citing breach of agreement by the TCG, IndianOil has also demanded that its earnest money of Rs200 crore be refunded.

The oil marketer already has an 8.9-per cent stake in the refinery, and in October last year emerged as the preferred bidder for disinvestment of the West Bengal government's 39.99 stake, along with preference shares held by various government undertakings (See: W Bengal govt accepts IOC's bid for Haldia Petrochem stake).

That announcement, made to the bourses, came with a rider that the consummation of the deal depended upon conditions like exercise of right of first refusal on the entire sale shares and outcome of proceedings pending before courts among others.

Moreover, the legal dispute over 15.5 crore shares, which is part of the sale of 67.5 crore, hasn't been settled yet, and Chatterjee in December got an upper hand with the Supreme Court allowing him in December to approach International Chamber of Commerce in Paris for arbitration while Calcutta High Court put a stay on the sale till January 21.

IOC is of the view that Chatterjee, one-time fund manager of George Soros and based partly out of New York, is better placed to win the case at an international forum.

In its letter, IOC has also raised objection to a decision for a Rs1,300-crore rights issue for fund infusion in the beleaguered company arguing that the price of Rs 25.10 a share is not realistic, sources said.

It is the price that IOC agreed to pay to the state to acquire its shares but it includes a controlling premium.

Delay in effecting the share sale agreement has raised the spectre of Haldia Petro getting referred to the Board for Industrial and Financial Reconstruction (BIFR) soon, with an accumulated loss of over Rs2,500 crore and having eroded 50 per cent of its net worth.

(See: Chatterjee again moves Paris court over Haldia share dispute)