Mumbai: Debt-laden Essar group on Monday concluded the sale of its crown jewel Essar Oil, including the captive port, power and retail assets, to Moscow-controlled oil giant Rosneft and a consortium of investors for $12.9 billion, making it the largest FDI into the country.
Signed on October 15, 2016 in Goa on the sidelines of the Brics summit, the deal was held back by domestic lenders. They will get around Rs 4,000 crore, paid back for over Rs 45,000 crore of loans, as they have “finally elected to stay with the new owner”.
Essar Oil has been partnering with Rosenft, the leader in Russian oil sector and also world’s largest publicly traded oil and gas company by reserves and liquid hydrocarbon output, since 2015 when it had signed a 10-year crude purchase deal.
The sale transaction involves Rosneft picking up 49 per cent stake in Essar Oil’s 20-million tonne Vadinar refinery in Gujarat, a captive port (58 mt) and a power plant (1,010 mw multi-fuel unit) and over 3,500 petrol pumps.
Besides, the Netherlands’ Trafigura Group, one of the world’s biggest commodity traders, and Russian investment fund United Capital Partners will split another 49 per cent equity among them equally.
While the refinery and retail assets are valued at $10.9 billion, the port and related infrastructure assets are valued at $2 billion.
Essar Oil was 98.26 per cent held by Essar Energy Holdings and Oil Bidco Mauritius. While Rosneft, through its arm Petrol Complex acquires 49.13 per cent, Trafigura-UCP consortium (via Kesani Enterprises Co) have an equal stake.
The remaining 1.75 per cent will be held by minority shareholders who refused to tender their shares in the delisting of Essar Oil last February, making the complete exit of the Ruias from its crown jewel that used to contribute over 25 per cent of its topline and over 75 per cent of its bottomline. The Ruias will however continue to remain in the oil sector with their British assets and CBM mines here.
These minority shareholders will be paid back according to the margin from the deal as per Sebi’s buyback regulations, the company said.
Essar Group director Prashant Ruia, announcing the closure of the deal, said the group will use the proceeds to pare Rs 70,000 crore, or around 60 per cent, of its total debt. Of this, Rs 4,000 crore will go to domestic lenders such as LIC and other state-run insurance companies and a few banks.
“The deal marks three firsts in the country — the largest FDI ever inflow; largest delevaraging in the history of India Inc and the largest contributor to the nation’s FDI inflow. This also marks another first — the largest outbound fund inflow from Russia to any country,” Mr Ruia told reporters.
Essar Group founder Shashi Ruia said this landmark transaction ushers in a new phase of growth across the group portfolio that hold great promise in development story.
With this deal, said Prashant Ruia, “we’ve completed our monetisation and deleveraging programme, which is the largest undertaken by any corporate in recent years. We’ve substantially deleveraged our portfolio companies’ balance sheets. With the completion of our capex programme of over Rs 1.2 trillion (Rs 1.2 lakh crore), we now look forward to a period of growth in our wider portfolio of businesses.”
