A joint lenders forum (JLF) led by State Bank of India (SBI) and ICICI Bank on Friday approved and authorised the release of shares of Essar Oil to facilitate its closure of the $12.8-billion stake sale to Russian energy major Rosneft, people familiar with the development said.
Essar Group with a debt of ₹1,51,000 crore will use “majority of ₹86,000 crore to repay the $5 billion debt of Essar Oil, Vadinar Port and Vadinar Power. Another $5 billion will be used to repay debts of the holding company Essar Global Fund. Besides, Essar Group also proposes to pay $1.5 billion to Iran for the oil dues,” a source said.
“The JLF comprising of 23 lenders today approved and authorised the release of shares of Essar Oil Limited (EOL) as per original terms and condition and the deal is likely to be complete in the next couple of the weeks,” said a banker of the lending consortium.
Rosneft CEO Igor Sechin announced at the company’s AGM on Thursday that the transaction could be “considered as closed,” paving the way for the culmination of the ₹86,000 crore deal, which is so far the largest foreign direct investment in India.
The deal was announced in presence of Prime Minister Narendra Modi, and Mr Vladimir Putin, President of the Russian Federation, at the BRICS Summit in Goa in October last year.
Refinery, outlets
The all-cash deal encompasses Essar Oil’s 20 million tonne refinery at Vadinar in Gujarat, and its pan-India network of over 3,500 retail outlets. Vadinar refinery, which accounts for 9% of India’s total refining output, is supported by a 1,010 MW captive power plant, and a 58 million tonne deep draft port that helps in importing crude and exporting finished products for the refinery.
Investing in EOL, which operates one of the world’s most complex refineries and runs India’s largest private sector retail network, gives the new stakeholders a strong foothold in the Indian market that will witness robust demand growth for petroleum products in the long term.
Indian market
The growth for refined petroleum products in the Indian market for the next five years is expected to be in the range of between 5% and 7%.
Meanwhile, the fate of the near bankrupt Essar Steel, with debt of ₹45,000 crore, will now be decided by the National Company Law Tribunal (NCLT).
Having failed to recover their dues or rope in either strategic or financial investors, lenders to these companies finally agreed on Thursday to resort to the Insolvency and Bankruptcy Code.
