Ruias of Essar sell oil firm to Rosneft-led group for $12.9 billion
A Russian consortium comprising energy giant Rosneft Oil Company, commodities trader Trafigura and private investment group United Capital Partners have signed a deal to purchase 98% of Essar Oil for Rs 72800 crore.business Updated: Oct 15, 2016 15:32 IST
A Russian consortium comprising energy giant Rosneft Oil Company, commodities trader Trafigura and private investment group United Capital Partners have signed a deal to purchase 98% of Essar Oil for Rs 72800 crore. This consortium will pay an additional Rs 13200 crore for buying Essar Oil’s port and other related infrastructure, making this deal the largest foreign direct investment into India.
The announcement was made during the BRICS summit in Goa, in the presence of Narendra Modi and Russian president Vladimir Putin.
Russian oil major Rosneft bought 49%stake in Essar Oil and commodities trader Trafigura Group-led consortium picked up another 49%.
Essar Oil, the second largest private refiner in India, operates a 400,000 barrel-per-day oil refinery at Vadinar in Gujarat, and sells fuels through its 2700 fuel stations.
The deal in its present contours includes Essar Oil’s Vadinar refinery as well as the Vadinar port and the petrol pumps.
There was an announcement earlier this year that Rosneft would buy 49% equity. But it seems the deal would not have been enough to address the debt mountain of around ₹88,000 crore the Essar group is buried under. Later it offered 74% to Rosneft, but the Russian company faces sanctions from the US and its majority holding in Essar Oil would have created problems for the Indian company and its lenders.
Indian banks have an exposure of ₹27,000 crore to Essar Oil.
Last year the US had issued a Crimea Sanctions Advisory in retaliation of the Russian “invasion” of eastern Ukraine. Entities on this list are subject to economic and trade sanctions on grounds that they pose a risk to US national security and are in violation of US foreign policy objectives.
First Published: Oct 15, 2016 15:31 IST