Haldia Petrochemicals is busy putting in place an action plan to avoid falling into the BIFR (Board for Industrial and Financial Reconstruction) fold.
Since a 50 per cent erosion in peak net worth will push the company into BIFR, HPL is striving hard to check the loss-making trend.
The spectre of a mandatory reporting comes amid speculation surrounding the issue of the sale of residual shares by the State Government, which holds the key to the settlement of the ownership dispute between the Chatterjee Group and the West Bengal Government. The dispute has plagued the company for nearly a decade and is now threatening its sustainability. Lenders are now expressing concern about taking further exposure as HPL's debt service ratio is now below 1, indicating that margins are inadequate to service debts.
HPL had a peak net worth of Rs.2,844 crore in 2007-08 which got eroded to Rs.2,097 crore on March 31, 2010. All efforts are now geared to stem the tide as the figure may touch Rs.1,422 crore, reflecting a 50 per cent erosion in the peak net worth.
The company closed its first-half of 2011-12 with a net loss of Rs.418 crore, which is estimated to have mounted to around Rs.600 crore, sources said. “If the company ends 2001-12 with a loss of Rs.675 crore, it will not be able to stave off the BIFR reporting,” according to sources.
The reasons behind this performance are many, including a depressed industry, the classification of HPL as an oil company, volatility in naphtha prices and the duty on the main feedstock. The situation turned dismal on account of its recently completed expansion project, Project Supermax, which not only suffered time and cost overruns, but has rendered the plant unstable due to faulty implementation.
The main tenets of an immediate action plan are effecting cost-savings through improved plant maintenance and operations. While this exercise has begun in right earnest, an international expert is likely to make some further suggestions.
A grade optimisation plan with an investment of Rs.1.50 crore is also being planned to finetune polymer production with market needs while keeping an eye on the contribution of the grade to earnings before interest, depreciation, tax, amortisation.
