In a strategic move, the state-owned Oil and Natural Gas Corporation (ONGC) has announced its plans to inject approximately INR 15,000 crores into ONGC Petro-additions Ltd (OPaL) as part of a comprehensive financial restructuring initiative. This financial overhaul will result in the withdrawal of GAIL, a major player, from its stake in the petrochemical company. Currently, ONGC holds a 49.36% stake in OPaL, with GAIL (India) Ltd holding 49.21% and Gujarat State Petrochemical Corp owning the remaining 1.43%.
Recognizing the financial challenges faced by OPaL due to its significant debt burden, the ONGC board has approved a restructuring plan that involves the conversion of share warrants into equity, debenture buybacks, and an additional equity infusion of INR 7,000 crores. This infusion will substantially increase ONGC’s stake in OPaL, giving it a majority ownership of approximately 95%.
Specifically, the approved proposal includes the conversion of share warrants issued by OPaL into equity shares, with ONGC paying final call money of INR 86.281 crores at the rate of INR 0.25 per warrant. Additionally, ONGC will repurchase compulsory convertible debentures (CCDs) valued at INR 7,778 crores, which were initially issued by OPaL with the support of ONGC and are currently held by financial institutions. Further strengthening its position, ONGC will invest an additional INR 7,000 crores in equity or quasi-equity securities of OPaL.
Upon the successful implementation of this financial restructuring, OPaL will become a subsidiary of ONGC, resulting in enhanced profitability. The total acquisition cost is estimated to be INR 14,864.281 crores.
OPaL, established in 2006, operates a large petrochemical complex, utilizing naphtha from ONGC’s Hazira facility and imported rich gas in Dahej. It is a significant contributor to the Dahej Petroleum, Chemicals, and Petrochemicals Investment Region (PCPIR) in Gujarat, exporting its products to over 50 countries. The OPaL mega petrochemical complex boasts a production capacity of 1.5 million tonnes per annum of polymers (including 1,100 KTPA ethylene and 400 KTPA propylene), 0.5 million tonnes of chemicals, and various other products, including units for pyrolysis gasoline hydrogenation, butadiene extraction, and benzene extraction.
In 2008, GAIL acquired a stake in OPaL when the petrochemical complex was under construction at Dahej. However, the project faced substantial cost and time overruns, leading GAIL to limit its equity investment to the original INR 996.28 crores. Initially projected to cost INR 12,440 crores, the project was ultimately completed in 2017, with a total expenditure of approximately INR 30,000 crores.
Following the financial restructuring, GAIL and Gujarat State Petrochemical Corp will collectively retain nearly 5% ownership in OPaL. ONGC, a Maharatna PSU (Public Sector Undertaking), had initially invested around INR 4,400 crores in OPaL. Regulatory constraints limit its investment in a joint venture to INR 5,000 crores.
As of March 31, 2023, OPaL had accumulated losses amounting to INR 13,000.3 crores.
