KOLKATA: The Chatterjee Group (TCG) will acquire a ‘substantial majority’ in MCC PTA India Corp (MCPI), a subsidiary of Mitsubishi Chemical Corporation. TCG hopes to complete the acquisition by November and revives the ailing purified terephthalic acid (PTA) manufacturer through technical collaboration and restructuring.
The deal involves taking MCPI — once considered Bengal’s pride — out of the purview of Board for Industrial & Financial Restructuring (BIFR) by infusing funds to write off it’s accumulated losses before management stake is transferred to TCG. The firm’s accumulated losses stands at around Rs 4,000 crore.
Mitsubishi Chemical Corporation (MCC) signed a share purchase agreement with TCG in Tokyo on Wednesday. MCC will retain a minority share in the company and continue to provide technical and operational support.
“MCPI’s main problem is the substantial amount of debt it has incurred, the huge accumulated loss and its continuance as a ‘sick unit’ under BIFR,” MCC said in a statement. “The only way we could help MCPI overcome this critical scenario is perhaps by infusing a large amount of additional capital to take it out of the fold of BIFR and to make it a zero debt company. This would enable it to mitigate its debt servicing and depreciation liability, factors that had been considerably affecting its profitability.” According to sources, the West Bengal government holds around 5 per cent in MCPI and TCG plans to acquire at least 70 percent in the company.
MCPI set up in 1997 for production and sale of PTA, a raw material for polyester, from its plant at Haldia in West Bengal. With a total investment of around Rs 3,600 crore in two phases, MCPI now has an installed capacity of 1.27 million ton per annum. It has a turnover of around Rs 6,000 crore and employs around 1,100 people. It supplies to materials to polyester and polyester fibre industries in India.
However, owing to severe market conditions MCPI became a ‘sick unit’ in April 2013 and has subsequently been referred to BIFR.
As part of the deal, MCC would share its experience and lend technical expertise to TCG-run Haldia Petrochemicals Ltd located next door so that it could have the benefit of value addition in order to improve its economic performance. According to MCC’s statement, this is part of its overall decision of accelerated transformation that involves structural reforms in the petrochemical business, which included restructuring ethylene production facilities.
