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Our Bureau

Essar Shipping, Vadinar Oil to be brought under new co

Mumbai , Aug. 17

As part of a major restructuring exercise in its shipping and logistics business, the Essar Group on Thursday announced that Essar Shipping will be brought under the the Group's new fully owned subsidiary, Essar Shipping and Logistics Ltd (ESLL), registered in Cyprus.

The new subsidiary will own 77 per cent of Essar Shipping.

The restructuring exercise will be spearheaded by Essar Global Ltd, which has investments in Essar Steel, Essar Oil and Essar Power, and has an asset base of over $6 billion.

3 operating cos

As part of the re-organisation plan, ESLL will have three operating companies under its umbrella — Essar Shipping Ltd, Essar Logistics Ltd and Vadinar Oil Terminal Ltd (VOTL).

VOTL, which will now be a fully owned subsidiary of the Cyprus-registered company, is setting up a 32-million-tonne terminal at Vadinar in Gujarat. It is likely to be operational by September 2006.

Unlocking value

The company claimed that the restructuring was primarily intended to unlock shareholders value in these businesses and provide a sharper focus to these business segments. It also claimed that the re-organisation would make the new subsidiary a top integrated logistics provider for steel mills, oil refineries and thermal power companies across the world.

Analysts however see a different reason for the restructuring initiative. First, by making VOTL a subsidiary of the Cyprus subsidiary, the company could tap the overseas market for funds, especially as the terminal project had faced considerable time and cost overruns. Also, the company's shipping business could benefit from a lighter tax regime, as the new subsidiary will own 77 per cent of Essar Shipping.

Essar Shipping owns a fleet of 27 vessels, including very large crude carriers, tankers and bulk carriers.

Mr Sanjay Mehta will assume the responsibility of CEO of ESLL and continue as Managing Director of Essar Shipping Ltd. Mr A.R. Ramakrishnan, who is currently the COO, has been inducted into the board of ESL as an executive director and will be designated CEO.

More Stories on : Restructuring | Shipping

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