Dhunseri Looks for a Partner for Egyptian PET Venture

Chandra Kant Dhanuka owned Dhunseri Petrochem is reportedly looking for a strategic equity partner for its Egyptian venture. The move follows full repayment of the joint venture – Egyptian Indian Polyester Company S.A.E’s (EIPET’s) outstanding dues and scaling up its holding to 93%.

Dhunseri Petrochem had earlier bought out its Egyptian partner’s stake in EIPET for roughly Rs. 90-crore. As per the ‘share purchase agreement’ entered into between the two partners, Dhunseri Petrochem acquired 43,700 equity shares (representing 23% stake) of EIPET from Egyptian Petrochemicals Holding Company (ECHEM) at par value in seven tranches. The last tranche will be bought in 2023.

The polyethylene terephthalate (PET) resin venture in the northwest of the Gulf of Suez has been incurring losses for some time now. The plant has not been in production for over a year because of lack of working capital.

“We have already paid the first two instalments. The remaining shares will be kept in an escrow account and given to us in instalments when we make the payments. We plan to start operation of the plant by August 2018,” informed Mr. Dhanuka, Executive Chairman of Dhunseri Petrochem.

While Dhunseri Petrochem was the majority partner in the Egyptian company with a 70% stake, Egyptian firms, ECHEM and Engineering for the Petroleum & Process Industries (ENPPI) owned 23% and 7%, respectively. Post-acquisition of ECHEM’s shares, Dhunseri Petrochem will now own 93% stake in the Egyptian jv.

The company has now announced that it has paid $87-mn to Commercial International Bank (Egypt) S.A.E., Ahli United Bank Egypt S.A.E., Ahli United Bank B.S.C. and International Finance Corporation as “final settlement of the outstanding dues owed by EIPET to the lenders”.

Dhunseri Group has been in talks with the lenders to settle outstanding debt of $198-mn because group company Dhunseri Petrochem, as the main shareholder, had given an undertaking that it would be responsible for repayment of the loans taken by the Egyptian enterprise. After protracted discussions, the lenders agreed to a haircut. The payment was funded by a mix of internal accruals of $30-mn and a short-term bridge finance from ICICI Bank, Mr. Dhanuka said.

According to industry observers the company’s strategy to bring in a strategic partner for the Egyptian firm would be similar to the restructuring of Dhunseri Petrochem’s India business where Indo Rama Group, the world’s largest PET maker, and Dhunseri swapped stake in each other’s PET venture.

The group is also reported to be in advanced discussions with ENPPI to buy out their 7% stake in the jv. If the deal is clinched, the Egyptian venture will become a wholly owned subsidiary of Dhunseri Petrochem, Mr. Dhanuka added.