India’s top FDI deal: Russia’s Rosneft-led group formalises $13-bn Essar Oil buy

In the largest inflow of foreign direct investment, Russia’s state-controlled oil giant Rosneft and its partners on Saturday took over India’s second biggest private oil firm Essar Oil in an all-cash deal valued at about $13 billion.

Rosneft bought a 49 per cent stake in Essar Oil’s refinery, port and petrol pumps, while Netherlands-based Trafigura Group Pte, one of the world’s biggest commodity trading companies, and Russian investment fund United Capital Partners split another 49 per cent equity equally. The remaining 2 per cent will be held by minority shareholders after delisting of Essar Oil.

The deal has an enterprise value of close to USD 12.9 billion USD 10.9 billion being for a 20 million tons a year refinery in Gujarat and over 2,700 petrol pumps and another USD 2 billion for Vadinar port in Gujarat. The deal factors in Essar Oil’s debt of about USD 4.5 billion and about USD 2 billion debt with the port company.

Also, the near USD 3 billion dues to Iran for past oil purchases will continue to be on Essar Oil books. Trafigura, which has been funded by Russian bank, may sell its stake to Rosneft at a later date. 

“We would be utilising significant portion of the deal proceeds in debt reduction. Group debt will reduce by about 50 per cent,” said Prashant Ruia, Director, Essar Group.