The State-owned Oil and Natural Gas Corporation (ONGC) is set to inject INR 150 billion into ONGC Petro-additions Ltd (OPaL) as part of a comprehensive financial restructuring initiative. This strategic move is expected to lead to the gradual exit of gas utility GAIL from the petrochemical firm, as reported by the news agency PTI.
Presently, ONGC holds a 49.36% stake in OPaL, the entity operating a massive petrochemical facility in Dahej, Gujarat. GAIL (India) Ltd maintains a 49.21% interest, with the remaining 1.43% stake being held by Gujarat State Petrochemical Corp (GSPC), as detailed in the report.
In a significant development last week, ONGC’s board granted approval for the financial restructuring of the petrochemical enterprise, which had been grappling with substantial losses attributed to its high debt burden. Under this restructuring plan, ONGC will undertake actions such as the conversion of share warrants into equity, the repurchase of debentures, and an additional INR 70 billion equity investment. These measures are anticipated to boost ONGC’s ownership to approximately 95%, as per a regulatory filing by the refiner submitted to the stock exchanges.
The approved proposal encompasses “conversion of share warrants issued by OPaL and subscribed by ONGC into equity shares upon payment of final call money of INR 8.63 billion at the rate of INR 0.25 per warrant,” as outlined in the filing.
ONGC will also engage in the “buy-back of compulsory convertible debentures (CCDs) worth INR 77.78 billion.” These CCDs, initially issued by OPaL with the support of ONGC, are currently held by financial institutions.
Furthermore, ONGC will commit an investment of INR 70 billion in equity/quasi-equity securities of OPaL. Upon successful implementation of these measures, OPaL will transition into a subsidiary of ONGC, as stipulated in the filing. The total acquisition cost is pegged at INR 148.64 billion.
Notably, in 2008, GAIL acquired a stake in OPaL when the latter was in the process of constructing the massive petrochemical complex in Dahej. However, the project encountered significant cost overruns and delays, leading GAIL to limit its equity contribution to the original sum of INR 9.96 billion.
The project, initially projected to cost INR 1.24 trillion at its inception, was eventually completed in 2017 with a total expenditure of approximately INR 3 trillion. Consequently, following the financial restructuring, GAIL and GSPC will collectively retain a stake of nearly 5% in OPaL.
ONGC had previously invested around INR 44 billion in equity and warrants in OPaL. As a Maharatna Public Sector Undertaking (PSU), ONGC is authorized to invest up to INR 50 billion in a joint venture. As of March 31, 2023, OPaL had accrued losses amounting to INR 1.3 trillion, according to PTI.