The proposed move for acquiring Nagarjuna Oil Corporation (NOCL) by Singapore-based Netoil (Singapore) (PTE) Ltd has hit a roadblock as the board of directors of Nagarjuna Oil Refinery Ltd (NORL), which holds 47 per cent of the equity share capital of NOCL, unanimously decided not to pursue the deal. In September last year, the company said a confirmatory due diligence of NOCL was being undertaken by Netoil to enable it to acquire the equity capital in NOCL to take forward the petroleum refining project of NOCL. “Further, Nagarjuna Oil Refinery Ltd has informed BSE that the board of directors of the Company at its meeting held on February 04, 2016 have unanimously resolved not to pursue the matter any further with Netoil,” said NORL in a regulatory filing. As reported earlier, Netoil had agreed to acquire the project for Rs 3,600 crore and had signed a term sheet with major investors, the Nagarjuna Group, which holds 47 per cent, and Tata Sons and Tata Petrodyne, which hold 25 per cent in NOCL. Earlier, sources in NOCL said the company required interim funding of Rs 24 crore to pay the salary backlog since November 2014. Service providers at the site were also threatening NOCL staff over unpaid dues, they added. The sources alleged the issue of back wages and vendor dues had not been addressed by Netoil or banks that had lent money to NOCL. Failure to clear dues may force the Tamil Nadu government to cancel the memorandum of understanding, said an NOCL employee earlier. Government officials were not available for comment. Responding to the allegation, Netoil then said, “We are not recognised as investors by the shareholders and lenders of NOCL. There is a restructuring process that needs to be completed. The company is negotiating with minority shareholders. It is not a question of Rs 24 crore, considering the company’s wealth and seriousness it want the project to be up and running.” “We are seriously considering to take over the project. So far $8 million have been spent for financial, technical and legal due diligence. We hope to do the financial closure by end of October,” said the company. Netoil had in April made an offer to KS Raju, chairman of the Nagarjuna Group, to bring in an advance of Rs 66 crore to pay the back wages and dues to vendors. Later it reduced this to Rs 24 crore as a short-term loan but even this was not provided to the company, NOCL sources said. The 6 million tonne refinery is the first phase of a Rs 25,000 crore project in which the total capacity was expected to be around 12 million tonne, according to reports. The project was delayed due to damages caused by a cyclone some years back and also hit by the global economic slowdown later. Around 15 lenders have invested in the project and later the Banks sought Reserve Bank of India’s dispensation in view of the assets likely to be classified by RBI as non-performing. An official from the company said in Net Present Value terms, if the VAT refund is Rs 18,000 crore, the company has to repay only Rs 15,000 crore in today’s value. In other words, the company will receive its entire entitlement of VAT refund of Rs 18,000 crore at the rate of Rs 3,000 crore every year in the first six years after commissioning. The company can utilise around 80 per cent of this Rs 3,000 crore, ie Rs 2,400 crore every year for any purpose it desires, e.g. repay the debt, go in for expansion and modernisation etc. The company needs to keep only the remaining 20 per cent or Rs 600 crore in FD for 16 years and that is enough to repay Rs 3000 crore plus 0.1 per cent interest after 16 years, explained a senior official, who didn’t want to be identified, earlier.
Source: Business-StandardNagarjuna Oil Refinery not to sell Cuddalore oil refinery to Singapore’s Netoil
Industry: Oil and Gas 2016-02-05