Lenders Approve Rs 86,000-Crore Essar Oil-Rosneft Deal
23-bank consortium to release Ruias' pledged shares to facilitate deal closure
A day after sending the Essar Group’s steel company to the National
Company Law Tribunal (NCLT) for action under the insolvency code, the
Joint Lenders Forum (JLF), led by State Bank of India and ICICI Bank, on Friday approved the Rs 86,000-crore stake sale in Essar Oil to Rosneft and the Trafigura-UCP consortium.
Sources said the 23-bank consortium approved the release of pledged shares of Essar Oil to
facilitate the closure of the transaction. With this, the Ruias would
exit the company and use the proceeds of the sale to retire their debt
to Indian as well as foreign banks.
The deal would help the Ruias reduce the Essar group’s debt by Rs 27,000 crore as the new owners would take over the debt of Essar Oil and launch their own brand in India.
The transaction would be the largest foreign direct investment (FDI)
in India and marks the entry of the Russian oil giant into the Indian
oil refining and fuel retail business.
The all-cash deal includes Essar Oil’s 20-million-tonne refinery at
Vadinar in Gujarat, and its pan-Indian network of over 3,500 retail
outlets. The refinery, which accounts for nine per cent of India’s
refining output, is supported by a 1,010 MW captive power plant and a
58-million-tonne deep draft port, which helps in importing crude oil and
exporting finished products for the refinery. The related
infrastructure is also being sold to Rosneft.
The deal was signed in October last year in the presence of Russian
President Vladimir Putin and Indian Prime Minister Narendra Modi.
The deal, however, was delayed as state-owned insurer Life Insurance
Corporation objected to the transaction and sought pre-payment of its
loans worth Rs 3,000 crore. The Ruias agreed to LIC’s demand and got the
institution on board.
By investing in Essar Oil, which operates one of the world’s most
complex refineries and runs India’s largest private sector retail
network, Rosneft would
get a strong foothold in the Indian market, which is expected to
witness robust demand growth for petroleum products in the long term.
Apart from the refinery, Essar will also sell the Vadinar Power
Company, two ports and 2,200 retail outlets, which are crucial for the
refinery’s operations.
The Indian oil and gas sector is witnessing a revival of sorts with
MNCs announcing increased investments. On June 16, Reliance Industries
and British energy major BP announced an additional investment of Rs
40,000 crore in exploration of oil and gas from the Krishna Godavari
basin off Andhra Pradesh coast.
The exit of the Ruias from Essar Oil ends
a chapter for the group which entered the business in the mid-1990s.
The construction of the refinery was delayed for a considerable time due
to a cyclone and regulatory delays, the commercial production started
only in May 2008.
Reference - http://www.business-standard.com/article/companies/lenders-approve-rs-86-000-crore-essar-oil-rosneft-deal-117062300267_1.html
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