Russian major Rosneft on Thursday said that it has finally closed the $12.9-billion acquisition of Essar group’s oil business. The deal was announced in October last year has been delayed as approvals from lenders have taken time.

“We’d like to inform that the legal decision was received yesterday, which guarantees the entry of the company in Essar Oil’s capital,” Igor Sechin, Rosneft CEO, and close ally of Russian President Vladimir Putin, has announced at an annual shareholders meeting held in Sochi . “Once the technical procedures are finalised, the deal can be considered closed,” he added.

Sources close to Essar Group confirmed that the company has received all the approvals from around 20 lenders after it had agreed to prepay some of the loans, including ₹800 crore to LIC. The Corporation did not respond to e-mail request seeking comments.

Analysts say for Rosneft the deal is a long-term strategic decision that could help the Russian state-controlled oil and gas giant to create better image internationally, especially at the background of Western sanctions against Russia which Rosneft is subject to.

Alexey Kalachev, an analyst with Moscow-based Finam, believes the deal is strategically good and well-structured, although its value has increased. “At the same time, apart from refinery, Rosneft is getting a deepwater port and good infrastructure, which is quite interesting. Considering the kind of assets Rosneft is getting, and that too in the country with 1.2 billion people and with fast growing consumption is a good strategic move,” Kalachev said.

Andrey Polischuk, Senior Vice-President, Raiffeisenbank AO, Moscow, told BusinessLine that Rosneft is now positioning itself as a growing international company, while most of its assets are located in Russia, and its international exposure is limited.

“Considering that, geographical diversification and increasing the number of strategic partners is something the company is trying to achieve by going ahead with this kind of deals,” he said.

Political move? However, not everyone is so optimistic about the deal. Sources in the Russian banking sector who spoke on condition of anonymity told BusinessLine that the deal was rather a “political one” with Rosneft being “requested” by the Kremlin to go ahead with it, despite the high price quoted. Back in 2014, when the first negotiations for the deal took place, Rosneft was estimating the share in Essar Oil at not more than $5 billion.

“Nobody sees the actual purpose of this deal for Rosneft, at this price, it rather looks like someone at very high political levels has been solving their own issues,” the sources cited above said.

Rosneft did not respond to request for comment on the deal valuation as well as its further plans to increase its share in Essar Oil once the transaction is completed. Trafigura/UCP spokesperson, too, declined to comment on the questions related to deal valuation and companies’ strategy for the acquired assets. “I’d say this deal is rather a strategic one, as the economic effect of it in the short-term perspective is not very evident,” Andrey Polischuk noted. “I believe for Russian companies it is more beneficial to invest in Russian upstream projects that are more profitable than international ones”.

According to Nandan Unnikrishnan, Vice-President and Senior Fellow at the Observer Research Foundation (ORF), there are enough benefits for Rosneft to be interested in the deal as India is expected to be the most energy-intensive country for the next few decades.

Essar spokesperson told BusinessLine the assets being sold to Rosneft-led consortium are fairly valued given the performance, operating parameters and future outlook. The announced enterprise value of $12.9 billion will be adjusted for agreed parameters viz-a-viz debt of the company to arrive at the equity value which will only be known at the time of the closure.

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