Haldia Petrocheimcals (HPL) will bring down its capacity utilisation further to reduce costs of operation since it has decided to divert working capital to pay its long-term loans.
To run its plant at full load, HPL needs around R48-50 crore to run a cycle of 42 days (the time between buying naphtha and selling polymer).
Sumantra Chaudhuri, managing director, said there is no alternative to avoid defaulting and meeting contractual obligations. ?What do I do other than diverting funds from working capital,? Chaudhuri said. ? I will have to further bring down the capacity utilisation and operate at deep losses. There is no other alternative for me.?
HPL was supposed to repay R133 crore to banks and financial institutions within September 30, including R30 crore on account of interest against an external commercial borrowing, R35 crore insurance premium and R68 crore principal amount.
Chaudhuri said the company will pay it in four tranches in a short period since the banks have agreed to give an extension to the time limit.
?With this, HPL will be able to avoid an immediate shut-down, but there is no doubt that the plant is heading towards closure,? said a board member on condition of anonymity. He said it was not the first time the company would be diverting working capital towards meeting long-term commitments. The CAG, which audits HPL accounts, has already made a mention of it in its recent report and put a stricture.
While there is already a scar on working capital management, firm?s (financial) drawing power has come to a near zero, the board member said.
An HPL official said the plant was running at a 50% capacity, it could further come down to 40%. An official said there was a possibility that the plant might opt for a shutdown and impose an embargo on bonus pay out.
Chaudhuri said HPL has a stock pile of 28 kilo tonne of polymer, whose value was around R250 crore. It was trying to liquidate that stock. According to an official, clearing that stock was a critical requirement since the company will need to buy naphtha with that money.
Although state industry minister and HPL chairman Partha Chatterjee said the government and the co-promoter, The Chatterjee Group, has started talks with SBI for fresh loans, sources close to the development said ?conditions being laid down by SBI were ?stringent and financially constraining?.
?SBI has given the condition of roping in an assured foreign naphtha supplier, who will itself sell the finished product (polymer) and realise the naphtha price. Naphtha accounts for 70% of HPL?s production cost and working capital requirement,? the source said, adding this mechanism will further squeeze HPL?s margin on polymer sales.
