Essar Oil completes $13 billion sale to Rosneft in largest FDI deal


Essar Oil completes $13 billion sale to Rosneft in largest FDI deal

EOL has a vast retail network of over 3,500 Essar-branded fuel stations across India.

It took more than 10 months to complete the deal after it was announced last October and more than two years after Rosneft first confirmed it was in talks to buy India's second-largest private oil refiner.

Debt-laden Essar group today concluded the sale of its crown jewel Essar Oil, including the captive port, power and retail assets, to Moscow-controlled oil giant Rosneft and a consortium of investors for Dollars 12.9 billion, making it the largest FDI into the country. Previously, in 2007, Essar Group, together with Hutchison Whampoa, brought Vodafone into India in a US$11.1 billion transaction. First, it represents the largest foreign direct investment (FDI) in India.

According to a Rosneft press release, the company has successfully closed strategic transaction for the acquisition of 49.13% of shares of Essar Oil Limited (EOL) from Essar Energy Holdings Limited (EOL) and its affiliates. The transaction got delayed after lenders wanted their debt, worth 450 billion rupees ($7 billion), to be cleared, according to media reports.

The deal was signed October past year, at the BRICS summit in Goa in the presence of Prime Minister Narendra Modi and Russian President Vladimir Putin. It is also the largest foreign fund outflow from Russian Federation.

Congratulating the Essar Group on the conclusion of the deal, oil minister Dharmendra Pradhan said it demonstrates the spirit of dynamic entrepreneurship in our country. We have substantially deleveraged our portfolio companies' balance sheets, reducing debt by over US$ 11 billion (Rs 70,000 crore). "Following this transaction, Essar has now helped attract more than US$30 billion of foreign investments into India".

"This day marks the beginning of a new chapter for Essar Oil".

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

Essar Oil's lenders include State Bank of India, ICICI, IDBI and Axis Bank. "With the completion of our capex programme, we now look forward to a period of growth in our wider portfolio of businesses". "Our stake in Essar Oil also complements Trafigura's growing presence in India at a time when the country's economic outlook is positive".

"This transaction reduces bank's exposure to the Essar Group by about 50 percent", Chanda Kochhar, MD & CEO, ICICI Bank said.

Part of debt that the group owes to Russian lender VTB will also be repaid, Ruia said but refused to quantify. 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.