As part of a financial restructuring initiative, the state-owned Oil and Natural Gas Corporation (ONGC) will invest around Rs 15,000 Crore in Opal, pushing the gas utility GAIL out of the petrochemical company.
ONGC currently holds a 49.36 per cent stake in ONGC Petro-additions Ltd (OPaL), which operates a mega petrochemical plant at Dahej in Gujarat. GAIL (India) Ltd has 49.21 per cent interest and Gujarat State Petrochemical Corp (GSPC) has the remaining 1.43 per cent.
The Petchem company’s financial restructuring was approved by the ONGC board last week. The company had been losing money due to its huge debt load.
The company said in a stock exchange filing, ONGC will convert share warrants into equity, buy-back debentures and invest Rs 7,000 crore more equity, which will give it about 95 per cent stake.
The proposal approved includes “conversion of share warrants issued by OPaL and subscribed by ONGC into equity shares upon payment of final call money of Rs 86.281 crore at the rate of Rs 0.25 per warrant,” it said.
Also, ONGC will “buy-back compulsory convertible debentures (CCDs) of Rs 7,778 crore.” CCDs issued by OPaL with backstopping support of ONGC are presently held by financial institutions.
ONGC will also invest Rs 7,000 crore in equity/quasi-equity security of OPaL, it said.
Upon implementation, OPaL would become a subsidiary of ONGC, it added.
The financial restructuring “will augment the holding of ONGC in OPaL and OPaL will become more profitable,” it said, adding that the total cost of acquisition would be Rs 14,864.281 crore.
OPaL was incorporated on November 15, 2006, as a mega, grassroots petrochemical complex to use naphtha produced by ONGC at Hazira as well as rich gas being imported at Dahej.
It is an anchor tenant of Dahej PCPIR, Gujarat and has exported its products to more than 50 countries.
OPaL mega petrochemical complex has a capacity to produce 1.5 million tonne per annum of polymers (1,100 kilo tonne per annum (KTPA) ethylene, 400 KTPA propylene), 0.5 million tonne of chemicals, and several other products through the associated units of pyrolysis gasoline hydrogenation unit, butadiene extraction unit and benzene extraction unit.
In 2008, GAIL purchased a stake in OPaL, which at the time was constructing the massive petrochemical complex at Dahej. However, the project experienced significant delay and cost overruns, leading GAIL to limit its equity participation to the initial Rs 996.28 crore.
The plant, which at the time of conception was projected to cost Rs 12,440 crore, was completed only in 2017 at a cost of about Rs 30,000 crore.
GAIL and GSPC will now together hold close to 5 per cent in OPaL post-financial restructuring.
ONGC had invested about Rs 4,400 crore as equity and warrants in OPaL. As a Maharatna PSU, it is permitted to invest only up to Rs 5,000 crore in a joint venture.
OPaL’s accumulated losses touched Rs 13,000.3 crore on March 31, 2023.
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