Indian Oil Corp has called off its decision to take over ailing Haldia Petrochemicals Ltd peeved at the continued legal tussle between the existing owners, West Bengal government and Purnendu Chatterjee, that has put a question mark over share transfer.
Communicating its decision not to execute the deal, IOC has written to the state government citing breach of agreement by the latter and has demanded that the earnest money of Rs 200 crore be paid pack, state government officials said.
IOC in October had said that it has emerged as the preferred bidder for disinvestment of 39.99% equity shares of Haldia Petro and 100% preference shares held by various undertakings of West Bengal government.
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.
The stake sale can get through only if Purnendu Chatterjee, who owns 41% stake and has a right of first refusal, could match the price bid by IOC within the next two months.
In its letter, IOC has said that the deal is being called off as the nod of The Chatterjee Group is yet to be received.
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 Rs 1,300 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, or BIFR, soon with an accumulated loss of over Rs 2,500 crore and having eroded 50% of its net worth.
EGoM to DECIDE ON IOC share sale today
The Empowered Group of Ministers or EGoM will discuss the proposal to sell 10% government stake in Indian Oil Corp Ltd to Oil and Natural Gas Corp Ltd and Oil India Ltd on Thursday as a compromise formula, after the panel last week disagreed on divestment in IOC through an offer for sale, a senior oil ministry official said. The government proposes to sell its 10% stake in IOC from the current shareholding of 78.92% to earn revenues as a part of disinvestment programme.
There are two options available with the EGoM, the official said. The EGoM is likely to mull selling 5% stake each to ONGC and Oil India, while the other option is to sell 7% stake to Oil India and the remaining 3% to ONGC, the official said.