ONGC To Infuse Rs 15,000 Crore In Petrochemical JV OPaL, Edge Out GAIL And GSPC

As of now, ONGC holds a 49.36 per cent stake in OPaL. GAIL (India) Ltd has a 49.21 per cent stake and Gujarat State Petrochemical Corp (GSPC) has the remaining 1.43 per cent.

Oil and Natural Gas Corporation (ONGC) has announced to infuse about Rs 15,000 crore in OPaL, its petrochemical joint venture between GAIL and Gujarat PSU GSPC. The move termed "Capital Restructuring" will see GAIL and GSPC being edged out of the firm. ONGC Petro additions Limited (OPaL) was incorporated on November 15, 2006, as a mega-grass root petrochemical complex. 

As of now, ONGC holds a 49.36 per cent stake in OPaL. GAIL (India) Ltd has a 49.21 per cent stake and Gujarat State Petrochemical Corp (GSPC) has the remaining 1.43 per cent. OPaL is an anchor tenant of Dahej PCPIR, Gujarat, and exports its products to more than 50 countries around the world. 

The ONGC board gave the green light for a financial restructuring of the petrochemical company in a meeting held on September 1. 

As part of this restructuring, ONGC intends to convert share warrants into equity, engage in a debenture buyback, and inject an additional Rs 7,000 crore in equity. These measures will result in ONGC holding approximately 95 per cent ownership in the petrochemical firm, the company said in its exchange filing on September 1. 

The proposal includes, "Conversion of share warrants issued by OPaL and subscribed by ONGC into Equity Shares upon payment of final call money of Rs 86.281 crore at the rate of Rs 0.25/ warrant...Buy-back of Compulsory Convertible Debentures (CCDs) of Rs 7,778 crore by ONGC."

CCDs issued by OPaL with backstopping support of ONGC are presently held by Financial Institutions/ Banks/ Mutual Funds and others, the filing said. 

The company will also invest Rs 7,000 crore in equity/quasi-equity security of OPaL. Upon implementation, OPaL would become a subsidiary of ONGC, it said. Adding that the move "will augment the holding of ONGC in OPaL and OPaL will become more profitable."

The total cost of acquisition would be Rs 14,864.281 crore. Following the financial restructuring, GAIL and GSPC will collectively hold nearly 5 per cent of OPaL.

OPaL mega petrochemical complex has the capacity to produce 1.5 million tonnes per annum of polymers (1,100-kilo tonne per annum (KTPA) ethylene, 400 KTPA propylene), 0.5 million tonne of chemicals, and several other products through the associated units of pyrolysis gasoline hydrogenation unit, butadiene extraction unit and benzene extraction unit.

According to a PTI report, in 2008, GAIL acquired a stake in OPaL, which was then in the process of constructing a large petrochemical complex in Dahej. However, the project encountered significant delays and cost overruns, prompting GAIL to limit its equity contribution to the initial Rs 996.28 crore.

Originally estimated to cost Rs 12,440 crore, the project was ultimately completed in 2017 at an approximate cost of Rs 30,000 crore.

Notably, ONGC had initially invested around Rs 4,400 crore in equity and warrants in OPaL. As a Maharatna PSU, it is authorised to invest a maximum of Rs 5,000 crore in a joint venture. OPaL's accumulated losses touched Rs 13,000.3 crore on March 31, 2023.