ONGC appoints consultants for due diligence of SPIC Petro

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Oil and Natural Gas Corporation (ONGC) has selected Engineers India Ltd (EIL) and law firm Amarchand & Mangaldas as technical and legal consultants respectively for conducting due diligence for its proposed plan to acquire stake in SPIC Petrochemicals, the petrochemicals business of SPIC ( Southern Petrochemicals Industries Corporation Ltd ).

The company is still in the process of appointing a financial consultant, a senior ONGC official told Business Line.

The company has already short listed three merchant bankers for the job.

ONGC has also got a back up technical consultant for the project, the official said. He, however, did not elaborate on the need for a back up.

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Following the Petroleum Ministry advice to explore involvement in SPIC Petrochemicals project, ONGC has taken the initiative.

It has shown keen interest in reviving the project, which has been hanging fire due to the dispute between SPIC and the Chennai Petroleum Corporation Ltd (CPCL).

Though both the sides had since resolved the dispute through an out-of-court settlement, SPIC, a sick company itself, was unable to revive the project of its own and has been looking for a new joint venture partner.

Asked whether the consultants would be examining the prospects of complete buyout, the ONGC official said, "Prospects of complete buy out of SPIC's petrochemical project cannot be ruled out. However, a final decision would be taken only after the due diligence and valuation of the project is completed."

The Chairman of ONGC, Mr Subir Raha, and his SPIC counterpart, Mr A.C. Muthiah, had earlier gone public saying that both sides were in discussions to revive the ailing project.

SPIC Petrochemicals was to put up a purified terephthalic acid (PTA) plant and a polyester filament yarn (PFY) project at Manali near Chennai.

Attempts to revive the project have not yielded much result with almost Rs 1,000 crore locked up in the project.

When the Madras High Court had passed an injunction in October 1997, Rs 946 crore was locked in the project.

Of this, SPIC's contribution was Rs 252 crore and the lenders had brought in Rs 694 crore.

At that stage, the PFY plant was more than 75% complete, or about 12 months from commencing production. The PTA plant had progressed 11%, or about two years away from production.

 Taken from Business Line

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