India and Russia’s largest outbound deal; Rosneft to take 49% in Essar Oil

The Dollar Business Bureau

A major deal between Essar Oil and a consortium led by Russian oil major Rosneft completed a $12.9 billion deal today. Rosneft will get a 49% stake in Essar, while the other two major investors Trafigura, a European trader and a Russian fund UCP, will hold the other 49% in equal parts. This acquisition is one of the largest outbound deals between India and Russia in recent times since the Soviet era.

The consortium has picked a trading veteran from its shareholders to run the Indian operations of the newly acquired Essar oil company.

The deal to acquire Essar Oil has been in the process for 2 years, with this acquisition Rosneft has gained access to Indian rising retail fuel market.

After BP and Royal Dutch, Rosneft  and Trafigura are the latest entrants into the Indian fuel market.

According to the deal details that were revealed to the media, Essar Oil’s Vadinar port and power plant associated with the 400,000 barrel-per-day oil refinery and its 3000 Indian retail fuel stations will also be acquired by Rosneft and its partners. Oil from  Venezuela will be supplied into the Essar refineries through Rosneft, LK Gupta, Managing director had revealed to the media last year, provided a deal is struck and Rosneft gets a major share in the company he had said.

With this deal, Essar Group’s debt burden shall decrease by about $11 billion, Prashant Ruia, Director Essar Capital had revealed to the media. "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 percent. 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.