The state-owned Oil and Natural Gas Corporation (ONGC) has approved a financial restructuring of ONGC Petro-additions Ltd (OPaL), a move that will see ONGC's stake in the petrochemical firm increase to about 95%. The decision comes as the company pivots towards crude-to-chemicals as a pathway to reduce its carbon footprint and achieve its net zero plan.
Following the restructuring, ONGC will infuse approximately Rs 15,000 crore into OPaL, which has been making losses due to high debt. The restructuring includes converting share warrants into equity, buying back compulsory convertible debentures (CCDs) worth Rs 7,778 crore, and investing an additional Rs 7,000 crore in equity. This move is expected to make OPaL more profitable and will transform it into a subsidiary of ONGC.
ONGC currently holds a 49.36% stake in OPaL, while GAIL (India) Ltd and Gujarat State Petrochemical Corp (GSPC) hold 49.21% and 1.43% respectively. After the restructuring, GAIL and GSPC will together hold close to 5% in OPaL.
OPaL operates a mega petrochemical plant at Dahej in Gujarat and was incorporated on November 15, 2006. The complex uses naphtha produced by ONGC at Hazira and rich-gas imported at Dahej. It has the capacity to produce 1.5 million tonnes per annum of polymers and 0.5 million tonnes of chemicals, among other products.
The company had previously faced major cost and time overruns during the construction of its mega petrochemical complex at Dahej. Initially projected to cost Rs 12,440 crore, the plant was completed only in 2017 at a cost of about Rs 30,000 crore. GAIL had restricted its equity contribution to the original Rs 996.28 crore due to these overruns.
The restructuring comes after OPaL's accumulated losses reached Rs 13,000.3 crore on March 31, 2023. ONGC had previously invested about Rs 4,400 crore as equity and warrants in OPaL. As a Maharatna PSU, ONGC is permitted to invest only up to Rs 5,000 crore in a joint venture.
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