MUMBAI, Aug 12: Hindustan Petroleum Corporation will invest Rs 363 crore in fully convertible debentures (FCDs) of Mangalore Refinery and Petrochemicals (MRPL) to finance the cost of its expansion. Shareholders approval to make this investment will be sought at the corporation's annual general meeting scheduled to be held here on August 29.

Mangalore Refinery's three-fold expansion to nine million tonnes is estimated to cost Rs 3,690 crore and will be financed through debt and equity participation. Hindustan Petroleum's partner in the project, the AV Birla group of companies, will also invest a similar amount in these fully convertible debentures, sources say.

The expansion in capacity is being done "in order to achieve economies of scale and also to cater to the growing demand of petroleum products in southern India."

The fully convertible debentures will be converted into equity shares of Rs 10 each at a premium of Rs 9.26 per share any time within 18 months from the date of allotment of debentures. After their conversion, Hindustan Petroleum's equity holding in Mangalore Refinery will increase to 37.38 per cent till further issue of capital to the public.

The move to invest in fully convertible debentures is a modification from the corporation's earlier decision to go in for the equity route. Last year, the corporation had received shareholders approval at the 44th annual general meeting to invest in equity to the extent of Rs 364 crore.

Mangalore Refinery was promoted in 1988 by Hindustan Petroleum along with Indian Rayon and Industries (IRIL), Grasim Industries and Indo-Gulf Fertilizers. It was incorporated for the purpose of setting up inititally a three million tonne refinery in Mangalore in Karnataka.

As per the memorandum of understanding entered into by the corporation with Indian Rayon and Industries and its associate companies, it was agreed that each would contribute 26 per cent in Mangalore Refinery's equity capital.

The refinery was commissioned in March last year at a cost of Rs 2,696 crore. Hindustan Petroleum also plans to set up a refinery in Bhatinda in Punjab along with Saudi Aramco. Both partners will hold 26 per cent each in the project. The capacity planned initially was six million tonnes but now a feasibility study is in progress to determine if this can be expanded to nine or 12 million tonnes.

The Punjab refinery will also have a pipeline from Bhatinda to Pathankot which may even be extended to Udhampur in Jammu depending upon the demand in the region. Hindustan Petroleum has also planned to set up a 800 mw power plant near the refinery.

The corporation is also expanding capacity at its Vizag refinery to 7.5 million tonnes from the present 4.5 million tonnes. This is expected to be completed by June next year.

Hindustan Petroleum will seek shareholders approval at its 45th annual general meeting to appoint Swarup K Gupta and SK Kerr as directors of the corporation. Gupta was appointed as additional director (part-time) on the board effective April 26 this year and replaced Shanti Narain, adviser (traffic), ministry of railways. He is additional member (traffic), railway board, in the ministry of railways. Kerr, earlier executive director-sales, was appointed additional director on October 24 last year. He has been in HPCL for 32 years.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.