India’s Essar Group has become one of the largest privately owned Indian business entities, with annual revenues of USD 35 billion, after completing the delisting of Essar Oil. The delisting would pave the way for Essar Oil to finalise its deal with Russia’s OJSC Rosneft Oil Company (Rosneft). Delisting was a pre-requisite for the deal.
Essar secured a USD 330 million loan from Russian bank VTB to delist Essar Oil.
Essar Oil is a fully integrated oil and gas company with strong presence across the hydrocarbon value chain from exploration & production to refining and retail. However, more than 90% of its revenue is derived from the refining segment. It owns India’s second largest single site refinery, Vadinar, which has a capacity of 20 million metric tonnes per annum (MMTPA) and a complexity of 11.8, which is amongst the highest globally.
Essar Oil sells fuel through 1,600 stations in India. After Rosneft’s entry, the company would increase the number of stations to 5,000 within two years.
The two companies also plan to boost Vadinar’s refinery output to 45 MMTPA by 2020.
The Essar Group has paid INR 7,200 crore (USD 1 billion) to investors to delist Essar Oil, Essar Ports, Essar Steel and India Securities.
The price of Essar Oil was hovering around the INR 100 (USD 1.50) level around the delisting announcement. Thus, the price paid to stockholders of INR 262.80 (USD 3.93) represented a premium of more than 150%. The delisting of Essar Oil, which is the largest on Indian bourses, paid out INR 3,745 crore (USD 560 million) to general shareholders.
The group now has only one listed company, Essar Shipping, which has a market capitalisation of INR 500 crore (USD 74.8 million).
Last July, Rosneft signed a deal with Essar Group to buy a 49% stake in its Vadinar, Gujarat, oil refinery. The announcement was made after Rosneft signed a 10-year deal to supply Essar Oil with crude oil. The key terms of this agreement were agreed upon last December in New Delhi, India.
With this transaction, Essar will rank among one of the world’s largest privately held conglomerates with large-scale, world-class operations across the globe.