TCG in pact with Mitsubishi to acquire MCPI.

Purnendu Chatterjee’s The Chatterjee Group (TCG) recently entered a share purchase agreement with Japanese major Mitsubishi Chemical Corporation (MCC) in Tokyo to acquire a majority stake in Kolkata-headquartered MCC PTA India (MCPI), for an undisclosed sum. MCPI makes purified terephthalic acid, better known as PTA.

MCPI was the first major Japanese foreign direct investment in India. Once the share sale takes place, MCC will hold a minority stake to facilitate technical and operational support to TCG.

TCG operates the standalone naphtha-based Haldia Petrochemicals Ltd (HPL) in West Bengal, which recently came back into the black.

PTA or purified terephthalic acid is mostly used in producing polyester fibres used in the textiles industry. Reliance is the biggest producer of PTA in India.

According to a press release issued by MCPI, the ₹6,000 crore turnover company was incorporated in 1997 and started production early in the last decade.

The company invested ₹3,600 crore in two phases to reach an annual capacity of 1.27 million tonnes at its Haldia facility in West Bengal. The plant employs 1,100 people.

Business restructuring

According to the release, the decision to sell a majority stake in MCPI is part of Mitsubishi Chemical Corporation’s effort to restructure its petrochemicals business in India and China.

Mitsubishi Chemical Holdings Corporation, the holding Company of MCC, on Wednesday took the twin decisions of divesting its majority stake in MCPI as well as in its China PTA and Poly Tetramethylene Ether Glycol businesses.

The PTA business was suffering due to global oversupply. The Indian business suffered badly in the face of dumping (from China) beginning 2011 and 2012. “MCPI became a sick unit in April 2013 and was subsequently referred to BIFR,” the release said.

Parent Mitsubishi Chemical Corporation extended additional support to MCPI through “softer loans” and focussed management guidance. It made the Indian operations more efficient.

However the main problem, which continues, is a “substantial about of debt… huge accumulated losses and its continuance as a sick unit under BIFR”.

A banking industry source says MCPI doesn’t have much loan exposure in India as the promoters offered cheaper funds from abroad.

Market creation

Mitsubishi Chemical Corporation believes the remedy is infusion of fresh capital to take it out of BIFR and that the divestment to TCG will pave the way for that.

Additionally, for the parent, the inclusion of TCG would help develop a stronger local market for PTA, which is currently consumed mostly in Western India. TCG in the past helped develop downstream user industries for Haldia Petrochemicals.

Chatterjee told BusinessLine that while HPL’s business has no immediate link to MCPI, in the days ahead the acquisition may open doors to synergies in manufacturing high-value-added products. He confirmed that market making for MCPI will be a focus area for TCG.

HBL