Haldia Petrochemicals Ltd (HPL), controlled by Purnendu Chatterjee’s The Chatterjee Group (TCG), has proposed the amalgamation of wholly-owned subsidiaries Haldia Cracker (HCCL) and Bengal Cracker (BCCL) with itself.

The company and its subsidiaries approached the Calcutta High Court in April for approval of the scheme.

The subsidiaries were created to run parts of the plant and attract investments. The merger proposal has already been approved by bankers.

Banking industry sources say the merger will increase the revaluation reserve of the company, thereby increasing its net worth. Additionally, the merger may plug the scope of tax leakages on account of business transactions within subsidiaries or between the subsidiaries and the holding company.

HPL is eastern India’s only petrochemicals project. It has an annual ethylene production capacity of seven lakh tonnes, and uses naphtha as feedstock.

The standalone petrochemicals segment reported a net-worth of ₹2,844 crore in 2006-07, after which the company’s fortunes started declining.

The situation started worsening rapidly in 20011-12, when operations were seriously affected due to a cash crunch and the company was reported to the Board for Industrial and Financial Reconstruction (BIFR) for incipient or potential sickness, meaning its accumulated losses were more than half of its peak net-worth.

Production was stalled for seven months in 2014-15, pushing the company deeper into the red.

Turnaround

HPL would have ended with a negative net worth in the last fiscal year if the Chatterjee had not acquired a majority stake in the company from the West Bengal government, with SBI supporting it with a timely debt recast.

While the results for 2015-16 have not yet been declared, sources say HPL has recorded a dramatic turnaround with its EBIDTA reaching around ₹2,000 crore or more, riding on the boom in the petrochemicals industry.

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