Page 43 - Plastics News February 2018

BUSINESS NEWS

ONGC raises borrowing limit to Constantia Parikh plans

Rs 350 billion for HPCL deal Rs. 100-crore plant in Gujarat

il and Natural Gas Corporation (ONGC) has increased its onstantia Parikh, an Indian arm of European
Oborrowing limit to Rs 350 billion Cpackaging major Constantia Flexibles GmbH,
for the acquisition of government’s has announced plans to set up a greenfield project
entire 51.11 per cent stake in in flexible packaging with an investment of Rs. 100
oil refiner Hindustan Petroleum crore. The new unit will be set up at a cost of around
Corporation (HPCL).However, ONGC Rs. 100 crore to produce high barrier laminates that
chairman and managing director can be fully recycled and meet the requirements of
Shashi Shankar said that borrowing upcoming legislation on food and home and personal
will be the final option before the care packaging sector.The plant will house the latest
board to finance the deal. “We have a cash balance of machinery to manufacture sustainable packaging. The
about Rs 130 billion. In addition to this, our liquid assets project is aimed at supporting Swachh Bharat Mission.
in the form of stakes in Indian OilCorporation and GAIL The new unit, expected to come on stream in 2019,
(India) worth about Rs 300 billion. If required only, we will will be equipped to comply with the upcoming Plastic
go for the third option of short-term borrowing, the limit Waste Management Regulations and meet the highest
of which was extended by the board to Rs 350 billion now international environmental, hygiene and work safety
from Rs 250 billion,” Shankar said. standards. The site is currently under construction. It
will be home to a polyethylene blown film extruder,
According to reports a share purchase deal was signed to
buy the government stake in HPCL for Rs 369.15 billion,
paying a premium of over 10 per cent taking a 60-day
weighted average of HPCL scrip. Also there are chances
that the company may not use its entire cash balance
at one go, instead may go for the option of a mixture
of using cash balance and short-term borrowings. Later,
the company may sell its liquid assets at an appropriate
value to payback the borrowings. Moreover, the company
also has loan commitments in place from domestic and
foreign lenders totaling over Rs 500 billion, sources said. high-definition flexographic printing press and
With the HPCL deal and the GSPC deal that was closed laminators that will produce high barrier laminates
early this year, ONGC will be completing an in-organic that can be fully recycled. The extra capacity will come
growth to the tune of Rs 480 billion for the financial year on stream in 2019 and will serve the growing demand
2017-18 only. Shankar added that the company may not from leading multinationals in the food and home and
require shareholder approval for increasing the borrowing personal care industries in India. The flexible packaging
limit. “HPCL is a well-run company and we have Mangalore market in India is expected to show double-digit growth
Refineries (MRPL) too in the downstream space. For in the mid-term, driven by the trend of urbanization
sourcing of crude oil this will be advantageous as we will be and the expansion of the retail sector.
getting more bargaining power,” he said. ONGC’s valuation Parikh Packaging has been part of Constantia Flexibles
adviser Earnst & Young (EY) had put HPCL’s valuation at since 2013 and already has a production unit in
Rs 475 a share plus a premium for getting the controlling Ahmedabad, including rotogravure printing machines,
stake. The company said that its board approved the PE extruders, various lamination technologies and
acquisition of the shares at a cash purchase consideration pouch making.
of Rs 473.97 per share. “We offered well within the Constantia Flexibles had acquired Gujarat-based Parikh
numbers recommended by the consultant. Though HPCL Packaging Pvt Ltd in 2013, which provided packaging
will become a subsidiary of ONGC, its identity as a CPSE solutions to multinational and domestic FMCG players.
will be maintained alisted entity,” Shankar said.

43 Feb ruar y 2018 Plastics News