After creating valuation, Essar promoters to sell 74% stake to clear of Rs. 50K Cr debt

After creating valuation, Essar promoters to sell 74% stake to clear of Rs. 50K Cr debt

After creating value in its oil refining and marketing assets, the Mumbai based Ruia brothers controlled Essar Oil is planning to divest another 24% stake in the company. The move is aimed at substantially reducing the debt burden of the group.

Sources revealed that the promoters of the Essar group are already close to finalising the deal to sell a 49% stake to Rosneft. They added that there is also a plan to offload an additional 25% to international trading companies and other financial investors.

As a result, the promoters will divest upto 74% stake in Essar Oil. With this mega deal, Essar Group to reduce Rs 42000cr of debt, considerably de-leveraging the group.

According to sources, Essar has already commenced discussions with more than one interested foreign investors for selling upto 25% additional equity. “Company has already entered agreement with Russian oil major Rosneft to sell 49% stake….the Rosneft deal likely to conclude by July 2016. Sale of additional 25% equity is expected to conclude in the July-August Quarter of 2016,” sources added.

Rosneft’s chairman Igor Sechin during his India visit had “confirmed” the company’s interest to buy into Essar Oil. Retiring Rs 42000 Cr of debt, sources said, would form about 50% of the group’s overall debt exposure. Major lenders to the group includes ICICI Bank, Standard Chartered Bank and Axis Bank.

Following the multi transaction deal with Rosneft and FIs, Essar group will hold a 26% stake in the company that owns and operates an oil refinery with an annual capacity of 20 million tonnes at Vadinar in Gujarat.

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Essar group that also owns the Vadinar port and oil terminal — part of the group’s port business but is largely captive to Essar Oil — may also divest this as part of the sale.

Recently Essar promotors paid Rs 3,347 cr to minority shareholders as part of Essar Oil delisting which was the largest pay out to Public shareholders amongst Indian delistings.

The delisting had valued the company at approx. Rs 38,000 cr equity value and enterprise value of about US $10 billion.

Once concluded this deal will be one of the largest FDI deals in India and will also be the first mega foreign investment into the core sector since the Modi led UPA Government came to power.

Russian oil major Rosneft’s deal with the Essar group for picking up a 49% stake in Essar Oil, is also the biggest private sector investment from Russia in India.

India and Russia are moving strong on the energy front and besides the Essar deal, a consortium of Indian oil companies led by ONGC has recently committed a substantial outbound investment from India into Russia.

Rosneft, the world’s top listed oil producer, will get a hold in India’s second biggest oil refinery as well as its 2,400 petrol pumps that will more than double to 5,000 in two years.

The Russian firm will also supply 10 million tonnes a year of crude to Essar Oil’s 20 million tonnes per annum Vadinar refinery in Gujarat for 10 years.

Anupama Airy
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Anupama Airy

Founder and Editor at EnergyInfraPost
Independent Journalist and Energy Expert.​ (Worked with leading mainline financial and national daily for 23 years.​)​ Also, Guest Contributor with busines​sinsider.in
Currently, Writing a Book for Penguin India Titled Greased Pole:How Politics and Lobbying Stifled India’s Energy Dreams. The author can be reached on anupama.airy@gmail.com (9810661825)​
Anupama Airy
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