E-Paper
$13bn or 7bn? A deal to kill Essar’s debt
Going by the buzz, the Ruias are selling most of their stake in Essar Oil to a group led by Russian oil giant Rosneft — a big deal that will be the panacea for their ills of debt.
New Delhi
Going by the buzz, the Ruias are selling most of their stake in Essar Oil to a group led by Russian oil giant Rosneft — a big deal that will be the panacea for their ills of debt.
Essar Oil is the second-largest private refiner in India and sells fuel through its 2,470 filling stations. Rosneft’ s board was meeting late Thursday night in Moscow and was tipped to decide on the acquisition.
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 Rs 88,000 crore (as of March 31, 2016) 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 Ess ar Oil would have created problems for the Indian company and its lenders. Indian banks have a debt exposure of Rs 27,000 crore to Essar Oil.
The buzz started in the morning, with a front page report in a financial daily that the Ruias were selling a controlling stake in Essar Oil to Rosneft and a smaller stake to commodities trader Trafigura. The stamp of near-confirmation came when people representing Essar started to invite journalists to Goa on Saturday for a big press conference.
Given that Russian president Vladimir Putin is in Goa for the BRICS summit, it would make sense for a Russian company to use the opportunity for a big announcement. The Essar group refused to comment, but that did not deter news agencies from going to town with the news.
Reuters said a group led by R osneft will acquire Essar Oil in a $12-$13 billion deal, including debt. Rosneft will get 49% the two investors—Trafigura and a Russian fund UCP — will hold the remaining 49% in equal parts. Russia, the news agency said, is keen to develop and deepen its Soviet-era economic ties with India at a time when its own economy is stagnant.
Press Trust of India, for its part, gave a more guarded estimate, putting the deal size at $7 billion deal, and named Rosneft, Trafigura, and “some financial investors” as the buyers.
Essar refused to comment on the media reports.
