Sure King Varun Hong Kong, a special purpose vehicle company of the Varun Group, has sold 51 per cent stake in onshore oil block at Madagascar in Africa to China-based Da Qing Oil Field Company.

The SPV, which retains the remaining 49 per cent stake in the oil block, will receive $150 million (about Rs 750 crore), besides a commitment from the Chinese company to arrange necessary funds for developing the oilfield.

Mr Rathnakar Hegde, Group Advisor, Varun Industries, said the deal will not only help the company to monetise its oil assets but also ensure steady revenue from the business. “The Chinese company will raise funds either in Hong Kong or China, but the quantum of fund to be mobilised is not yet decided. We are also exploring a similar arrangement for our offshore asset of 13,200 sq km in Madagascar, he said. The SPV will also leverage the strong presence and strengths of Da Qing Group to trade in oil sector. The onshore Block 3101has prospective resources of about 3,067 million barrels and is considered to be one of the most prominent blocks in Madagascar.

DEPLOYMENT

The company intends to invest the proceeds from the stake sale in its ongoing project in India and Africa. Varun Industries is expanding flat steel production at its Rajasthan plant to 1.2 lakh tonnes per annum from 40,000 tpa at an investment of Rs 850 crore. The project, which is expected to be completed by 2013-14, will entail an investment of Rs 240 crore in the first phase. As part of backward integration, it will set up a 5 lakh tonne pig iron plant at an investment of Rs 2,100 crore at Bagalkot in Karnataka. The company has also lined up investment plans for developing the rare earth finds in Africa.

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