In one of the biggest outbound deals between India and Russia, Rosneft-led group acquires Ruia’s Essar Oil

15th Oct 2016
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On Saturday, a Russian consortium consisting of state-controlled oil giant Rosneft, private investment fund United Capital Partners and world’s biggest commodities trader Trafigura announced the acquisition of 98 percent stake in Essar Oil, in an all-cash deal.

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Valued at about $13 billion, the acquisition is one of the biggest inbound foreign direct investments in India’s energy sector. As a part of the purchase, Rosneft bought 49 percent of equity in Essar Oil’s refinery port and petrol pumps while both Trafigura and United Capital Partners picked up another 49 percent equity in the company.

This was completed as a part of two separate deals, first with Rosneft and second with Kesani Enterprises Company Ltd, an entity owned by Trafigura and United Capital Partners.

Debt concerns

With the Essar Group having a high debt portfolio of almost Rs 88,000 crore, and the steel unit alone holding over Rs 40,000 crore in debt, this deal comes as some relief to the group.

This deal is reported to help the group reduce the overall debt by half and is estimated to close in the first quarter of 2017.  

In a statement, Prashant Ruia, Chairman of the Essar Group said,

The transaction demonstrates our unique ability to build-world class assets and create immense value in our businesses. The monetisation of our stake in Essar Oil will help us drive the next level of growth for our other businesses.

Also another additional $2 billion (Rs 13,300 crore) will be paid for the acquisition of the entity’s Vadinar Port, which is a 20- million tonne refinery located in the State of Gujarat.

Essar Oil delisted itself from the Bombay Stock Exchange (BSE) on December 30, 2015. Going by the company’s website, Essar Oil has a total portfolio of 1.7 billion barrels of oil equivalent in reserves and resources.

The deal was signed at the BRICS Summit in Goa in the presence of Prime Minister Narendra Modi and Russian President Vladimir Putin.

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