Mergers & Acquisitions

Essar Group to sell stake in Essar Oil to Rosneft

India’s Essar Group plans to sell a 49% stake in Essar Oil to Russia’s Rosneft for about INR 10,500 crore (USD 1.6 billion), according to reports from local media.

A team of senior officials from the Essar Group, led by promoter Prashant Ruia, is in Moscow to close the deal. “Now, the talks have narrowed down to valuation and an announcement is expected anytime,” said a banker close to the development. The transaction will lead to an open offer for minority shareholders, according to the Securities and Exchange Board of India’s takeover norms.

On Monday, Essar Oil’s stock closed at INR 146 (USD 2.27), up 4.72%. In the past four trading sessions, it soared 43%, as speculators bet on an imminent transaction. The company’s total market value stood at INR 21,163 crore (USD 3.2 billion) as of Monday.

The Ruias, along with Essar Energy Plc, own 90% of Essar Oil. After the deal, it will become a minority shareholder.

Rosneft signed a deal to supply Essar Oil with crude oil for its refinery in India last December. The agreement will further secure an outlet for its crude. Essar Oil owns a refinery at Vadinar in Gujarat, with an annual capacity of 20 million tonnes. It also owns the Stanlow Refinery in the U.K., with a capacity of 296,000 barrels per day. Currently, 35-40% of Essar Oil’s crude oil requirement at Vadinar comes from West Asia and 15-20% from domestic suppliers, while the rest is from South America.

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