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Having settled 80 per cent of its corporate debt, the Essar Group is betting on its de-leveraged books to raise additional funds to back its bid to buy-back Essar Steel and finance expansion plans of its existing businesses.
The Ruias have so far settled debt of nearly ₹81,000 crore by selling assets across various sectors including Essar Oil, business process outsourcing firm Aegis and real estate with Equinox. In addition, it is in the process of settling ₹45,000-crore debt on account of Essar Steel.
“Essar has so far deleveraged ₹1,25,000 crore of debt — largest by any corporate. This is over 85 per cent of total group liabilities. With its investment and deleveraging programmes complete, Essar is now geared up for growing its remaining portfolio of businesses,” said an industry source close to the Ruias.
“Essar today is a leaner, smarter and wiser corporate with a lighter balance-sheet. The group is set to roll out Essar 2.0 vision that will see new investments into existing businesses like power, shipping, ports and new areas,” the source added.
Analysts tracking the company said, “majority of Essar businesses are poised for growth as India enters a favourable commodity cycle. These businesses operate in sectors that are characterised by low per capita consumption in India and therefore have huge growth potential.”
According to sources close to the Ruias, Essar will continue to invest in its go-forward businesses but only to extract higher efficiencies in its operations. Essar businesses are now operating at capacity levels and are aided by a much lighter balance-sheet.
“Over the next couple of quarters, we plan to address our balance liabilities fully including that owed to Davidson Kempner Capital Management. This will provide us significant flexibility in making fresh investments to strengthen our portfolio companies and look at new investment opportunities,” the source said.
In the past, the Ruias have exited businesses like telecom and oil at good valuations. For example, Essar group sold of its minority stake in Vodafone India for over $5 billion. It recently sold Essar Oil to Russia’s Rosneft and a clutch of other investors for nearly ₹90,000 crore. But the group is putting all its weight to retain its steel business by offering to pay off all its debt. The Ruias are exploring legal options if its ₹54, 389-crore counter offer is not considered by the lenders of Essar Steel.
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