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Nearly a year after it struck a $12.9-billion deal with a Rosneft-led consortium, the Essar Group expects to conclude the deal with Russian oil giant by July 31, thereby reducing the Group’s debt by 50-55 per cent.
The Essar Group had accumulated debt of ₹83,000 crore. The approval for the deal with Rosneft was delayed by over a year by Essar’s creditors.
Contrary to unconfirmed reports that the government was concerned over the Russian company buying assets near strategic defence establishments and in close proximity to Pakistan sea border, company sources said the Centre had cleared the deal within a month, while the creditors took more than nine months.
Major lenders to Essar including State Bank of India and ICICI Bank had given the final approval to the deal three weeks ago.
The Russian consortium led by energy giant Rosneft Oil Company, commodities trader Trafigura and private investment group United Capital Partners will pay $10.9 billion (about ₹70,000 crore) for the 20 million tonne per annum (405,000 barrel per day) refinery at Vadinar in Gujarat and its retail outlets and another $2.9 billion (about ₹13,000 crore) for Essar’s port in Vadinar which has a capacity to handle 58 million tonnes of crude a year.
In turn, Essar Oil will transfer a debt of $5 billion (₹32,500 crore) to the Russian consortium and repay entire debt of $5 billion of Essar Global, the holding company of Essar Oil. The Group will also repay crude oil import bill of $2 billion (₹13,000 crore) from Iran. The remaining $900 million will be used to for capex and repay debt in India, said sources without dwelling into the ongoing insolvency proceedings against the group company Essar Steel which owes about ₹40,000 crore to banks.
Essar Steel’s petition in the Gujarat High Court against the NCLT proceedings was dismissed and the company filed its response petition with NCLT on Saturday. The company has sought six months time to work out the revival plan which was earlier approved by Indian Banks Association, an umbrella organisation of lenders. As per the revival plan, the company had agreed to bring in equity of ₹2,500 crore, including third-party infusion of ₹1,700 crore and the rest by promoters. The NCLT is to be heard on Monday.
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