India’s ONGC to raise stake in petrochemical producer OPaL

MUMBAI (ICIS)–India’s state-owned Oil and Natural Gas Corp (ONGC) will inject nearly rupee (Rs) 150bn ($1.8bn) in fresh investments to ONGC Petro-additions Ltd (OPaL), which operates a large-scale petrochemical complex in the western Gujarat state.

The additional investment will raise ONGC’s stake in OPaL to 95% from the current 49.4% as part of OPaL’s financial restructuring.

ONGC’s board has approved OPaL’s restructuring and expects to complete the acquisition in six months, it said in a statement to the Bombay Stock Exchange (BSE) on 1 September.

OPaL has been incurring losses since it started operations and has accumulated losses of Rs130bn as of end-March 2023, according to local news agency Press Trust of India. (PTI).

The company generated revenues of Rs146.3bn in the fiscal year ending March 2023, with an 82% capacity utilization rate.

Currently, ONGC holds a 49.4% stake in OPaL, while Gas Authority of India Ltd (GAIL) holds a 49.2% share and Gujarat State Petrochemical Corp (GSPC) holds the remaining 1.43% in the company.

As part of the restructuring programme, ONGC plans to convert share warrants issued by OPaL into equity shares which will cost the company Rs860m and buy back compulsory convertible debentures issued by OPaL worth nearly Rs77.8bn from financial institutions, it said.

ONGC also plans to invest Rs70bn in equity securities of OPaL These steps will allow ONGC to acquire 95% stake in OPaL which will make it a subsidiary of ONGC, the company said in its statement.

The financial restructuring “will augment the holding of ONGC in OPaL and OPaL will become more profitable,” it said, adding that the total cost of acquisition would be Rs148.6bn.

GAIL and GSPC will jointly hold a 5% stake in OPaL post the financial restructuring.

The OPaL petrochemical complex in Dahej has of a dual feed cracker, which can produce 1.1m tonnes/year of ethylene and 400,000 tonnes/year of propylene.

It also has a 340,000 tonne/year polypropylene (PP) line; a 340,000 high density polyethylene (HDPE) unit; and two linear low density polyethylene (LLDPE)/HDPE swing plants with a combined capacity of 720,000 tonnes/year at the site.

($1 = Rs82.86)