Essar Group on Monday announced closure of $12.9 billion deal to sell its refining arm Essar Oil to a consortium led by Russian oil major Rosneft, boosting ties between the world's top oil producer and the fastest growing fuel consumer.
The purchase is the biggest foreign acquisition ever in India and Russia's largest outbound deal. It helps Russia deepen economic ties with India that stretch back to the Soviet era.
Rosneft will get a 49.13 per cent stake in Essar Oil and the two investors, European trader Trafigura and a Russian fund UCP, will hold a similar stake in equal parts, Essar group said in a statement. The rest will be held by retail investors.
The deal will give Rosneft and its partners control of 400,000 barrels per day (bpd) Vadinar refinery in western Gujarat and its 3,500 retail fuel stations in India, where fuel demand is expected to rise by five to seven per cent in next few years.
The deal also reduces some of the pressure on Essar, which is controlled by the billionaire Ruia brothers. The group with presence in oil and gas, steel, ports and power, has been under pressure to reduce its debt burden.
Essar Group will cut its debt by about $11 billion, Prashant Ruia, Director, Essar Capital told a news conference.
"This is the single largest deleveraging ever undertaken in Indian corporate history", he said, adding overall at the group level the deal has helped bring down debt by 50 per cent.
The group's revenue without Essar Oil will be in excess of $15 billion, including operational facilities in sectors like minerals and metals, energy, infrastructure and services, Ruia said.
"With this deal we have completed our monetization programme...and the completion of our capex plan we now look forward to a period of growth in our wider portfolio of businesses," Ruia said.
He said the group has completed a capex plan of Rs 1.2 lakh crore in the last six years. "We are now refocusing our energy across our new portfolio of business."
