Russian investor Rosneft and a consortium led by United Capital Partners (UCP) and Trafigura on Monday announced taking control of Essar Oil, which owns the country’s second largest private oil refinery and produces nine per cent of domestic refining output.

The $12.9-billion deal, however, gives little clarity on what the immediate future holds for the company.

“We visited the facility at Vadinar (Gujarat) for the first time two days ago,” said Tony Fountain, Chairman, Essar Oil and nominee of UCP, one of the three majority shareholders. “We will soon put an asset development committee in place to see how best to use the refinery, the captive storage, port and power facilities.”

Fountain is not new to India. He was CEO of refining and marketing at Reliance Industries from 2012 to 2016, before which he spent 25 years at BP. The new CEO of Essar Oil is B Anand, the former Mumbai-based CFO of Trafigura India Pvt Ltd. The consortium of UCP and commodity trading company Trafigura now own 49.13 per cent of Essar Oil, while another 49.13 per cent is owned by Rosneft, the Russian state-owned oil behemoth.

On Monday, the parties closed the deal to take over control of Essar Oil from its previous owners — the Ruia-owned Essar conglomerate — at an enterprise value of $12.9 billion (₹86,000 crore).

The remaining 1.74 per cent stake of Essar Oil is held by retail shareholders.

The conclusion of the deal comes nearly two years after rumours first surfaced of Rosneft being interested in the Ruias’ refining assets. The Ruias were at their group level — with business interests in steel, power, ports and shipping — laden with debt believed to be in the range of ₹1.38 lakh crore.

Selling the refining assets — which includes the 20-million-tonne-a-year Vadinar refinery, a 58-million-tonne-a-year deepwater port and 1,010 MW captive power station — has brought the group’s debt levels down by almost half. Because of the deal, ₹34,400 crore of debt has moved out of the Essar Group’s books into those of the new shareholders.

Indian lenders, chiefly State Bank of India, ICICI Bank, IDBI Bank, Axis Bank and YES Bank, have had a joint exposure of ₹ 40,000 crore to Essar Oil. LIC and loans by a few other insurers have been repaid to the tune of ₹4,000 crore, while the remaining debt will continue in the books of Essar Oil.

Both the previous and new owners of Essar Oil have chosen to stay mum on other financial details. The new owners of Essar Oil will continue to use the Essar brand name at its 3,500 fuel retail outlets, which involves a royalty payment to the Ruia-promoted Essar group.

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