Billionaire brothers Shashi and Ravi Ruia have agreed to sell 98 per cent of Essar Oil and a port terminal at Vadinar to a consortium led by Russian oil major Rosneft for almost $13 billion. Oil trading firm Trafigura and private investment group United Capital Partners are the other partners in the group. Essar Group Chairman Shashi Ruia described the deal as a ‘historic day’ for Essar.
“The monetisation of our stake in Essar Oil will help drive the next level of growth for our other businesses,” said Ruia. The decision to sell ‘family silver’ was taken to pare the group’s debt of £9 billion by half.
Russia is keen to deepen its Soviet-era economic ties with India at a time when its own economy is stagnant, hit by Western sanctions. The Russian company will be the third international player after Royal Dutch and Shell and BP to enter the Indian fuel retailing market. Essar Group agreed to sell 49 per cent of Essar Oil Ltd. to Rosneft, and the rest in equal parts to the other partners, for an enterprise value of £7.28 billion ($10.9 billion), according to a statement from Essar.
Cash deal
The all-cash deal includes India’s second-largest refinery at Vadinar with a capacity of 20 million tonnes, and another $2 billion will be paid for a port terminal that helps feed the refinery. India is driving global oil demand as its economy expands and a rising middle class buys motor vehicles. The International Energy Agency expects India to account for a quarter of global energy use by 2040.
Commenting on the deal, Prashant Ruia, Director, Essar, said: “We have established world-class assets that have attracted the attention of leading global companies and investors. The deals we have done have led to an FDI infusion of more than $30 billion into India.” The business transaction was announced in the presence of Indian Prime Minister Narendra Modi and Russian President Vladimir Putin, at the BRICS Summit in Goa. Igor Sechin, CEO, Rosneft believes that this deal is a significant milestone for the company. “Rosneft is entering one of the most promising and fast-growing world markets.”
The deal closure is conditional upon receiving requisite regulatory approvals and other customary conditions and the parties expect to obtain the relevant approvals before the end of this year, according to the statement.
