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Rs 86,000 crore sale: SBI-led banks’ group clears Essar Oil sale to Rosneft

All lenders approve the deal; no new conditions for approval, officials say

By: ENS Economic Bureau | New Delhi/mumbai | Published: June 24, 2017 2:00:27 am
Essar Oil, Joint Lenders Forum, State Bank of India, Essar sale to Rosneft State Bank of India. (File Photo)


The Joint Lenders Forum (JLF) consisting of 23 banks, including State Bank of India and ICICI Bank, on Friday approved the Rs 86,000 crore Essar Oil stake sale to Rosneft thereby paving the way for completion of the deal that was signed in October 2016 in the presence of Prime Minister Narendra Modi and Russian President Vladimir Putin.

Having received the nod from the bankers, the Essar Group is now hopeful that the deal will be closed in July and Essar will realise Rs 86,000 crore for Essar Oil stake sale next month.

“The joint lenders forum of 23 lenders, led by SBI and ICICI, met here this morning and approved and authorised the release of shares of Essar Oil to facilitate the stake sale to Rosneft and the investment consortium headed by Trafigura and UCP,” the source said. “All the lenders including Life Insurance Corporation (LIC) and Punjab National Bank, which were sitting on the deal, approved the deal. There’re no new conditions for the approval,” said a bank official involved in the process.

While it is learnt that LIC (to which the company owes around Rs 800 crore) had some reservations, a source close to the development told that the company has proposed to prepay the due amount to LIC. “Essar Oil has given a prepayment letter to LIC for paying Rs 800 crore against Essar Oil, Vadinar Power and Vadinar Port,” the source said.

When contacted, a Essar Oil official said, “The company is working towards closing this transaction in a few weeks.” The JLF decision came a day after the Rosneft CEO Igor Sechin announced at the company AGM on Thursday that the takeover of Essar Oil by Rosneft can now be “considered as closed”.

The deal, where Rosneft will hold a 49 per cent stake, will allow the Russian company to increase oil refining output by 20 per cent this year, he said.

As per the deal, while Rosneft will buy a 49 per cent stake in Essar Oil, The Netherlands-based Trafigura Group Pte and Russian investment fund United Capital Partners would split another 49 per cent equity equally.

The all-cash deal, termed as the largest FDI in the country, encompasses Essar Oil’s 20 MT refinery in Gujarat, and its pan-India network of over 3,500 retail outlets. The refinery, which accounts for 9 per cent of India’s total refining output, is also supported by a 1,010 MW captive power plant.

The deal was signed on October 15 last year in the presence of Prime Minister Narendra Modi and Russian President Vladimir Putin in Goa on the sidelines of the BRICS summit.

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