Rosneft confirms acquisition of Indian refinery stake

Adjust Comment Print

Rosneft (ROSN.L) announced Monday that it has completed the acquisition of 49.13 percent stake in India-based Essar Oil Limited from Essar Energy Holdings Limited.

It was in October past year that Rosneft announced the signing of the Sale and Purchase Agreement for a 49% stake in Essar Oil.

Essar Group will reduce its debt by about $11 billion and shift focus to its struggling steel business. In attendance were Indian Prime Minister Narendra Modi and Russian President Vladimir Putin, and Essar described the deal as India's largest example of inbound foreign direct investment.

"We are confident that together with all the new shareholders - recognised leaders in their industries, we will oversee the growth potential of Essar Oil to increase the long-term value of the company".

And a consortium comprising Trafigura and UCP has also announced its purchase of a separate 49.13% share of Essar. 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".

Commenting on the development, ICICI Bank Chief Executive Chanda Kochhar said in a statement: "ICICI Bank has played a key role through the entire process of completion of the transaction since it was announced in October previous year". This transaction reflects the shared vision of two of the world's most dynamic leaders.

Maersk Sells Oil and Gas Division to Total
The deal with Total is expected to be completed sometime in early 2018 - pending approval from the competition authority. Moller-Maersk and to this very day plays a decisive role in the Danish and global oil and gas industry", she said.

The group's debt is pegged at Rs 80,000 crore and according to Prashant Ruia, director of Essar Capital, the deal with Rosneft, Trafigura and UCP will help Essar retire debt to the tune of Rs 70,000 crore. "For Essar, the closure of this landmark transaction ushers in a new phase of growth across our portfolio of businesses that hold great promise in India's enduring development story".

"With this deal, we have completed our monetisation and deleveraging programme, which is the largest undertaken by any corporate in recent years".

Following the closure of the sale, Essar Oil announced the appointment of a new board of directors and chief executive officer. "The acquisition of the stake in the Vadinar refinery creates unique opportunities of synergies with existing Rosneft-owned assets and will help improve efficiency of supply to other countries within the region", Igor Sechin, CEO of Rosneft said in the joint statement.

Essar Oil's lenders include State Bank of India, ICICI, IDBI and Axis Bank. "Our stake in Essar Oil also complements Trafigura's growing presence in India at a time when the country's economic outlook is positive".

Part of debt that the group owes to Russian lender VTB will also be repaid, Ruia said but refused to quantify. The refinery was set up 22 years ago with a 3 million tonne annual refining capacity and was scaled up to 20 MT over a period, making it the second largest facility in the private sector. Under the deal, Essar Oil has a non-compete agreement with Essar Group, which can not venture into oil refining and fuel retailing, Essar Oil Director Kris Zielicki said.