Lenders clear Rosneft-Essar Oil deal

Under what has been hailed as India's biggest FDI deal, $13 billion, or Rs 84,000 crores, will be paid by Rosneft, a Russian bank UCP and a Swiss commodity trading form for 98 per cent stake in Essar Oil.

A consortium of 23 lenders led by State Bank of India today cleared the Rs 86,000-crore sale of Essar Oil to Russia's Rosneft-led group after the Ruias agreed to clear a part of the Rs 26,000-crore loans, including that of Life Insurance Corporation.

Highly indebted Rosneft, which has been on a buying spree for the past few years to become the world's largest oil producer by output, had fought off the order.

State-run oil exploration and production company Rosneft said on Thursday that it has completed its delayed takeover of a 49% equity stake in the private oil refining and marketing Essar Oil for $13 billion, or about Rs 84,000 crore, closing a deal agreed in October previous year.

Government sources tell ET Now that the Home Ministry and IB have objected to the Vadinar Port being a part of this transaction, which has been hailed as India's largest FDI deal and signed past year in the presence of PM Narendra Modi and his Russian counterpart Vladamir Putin in Goa at the sidelines of the BRICs Summit.

The purchase of Indian refiner Essar Oil by a consortium led by Russian oil company Rosneft has been delayed, the two sides said on Friday, . It is a part of the Essar Group based in Mumbai.It operates a refinery major in Vadinar, Gujarat, India, which made it the second largest non-state refiner in India in 2009. Rosneft acquires 49% of the Vadinar refinery, one of the most sophisticated refinery in the Asia-Pacific region, possessing a complex infrastructure.

Apart from the refinery, Essar will also sell the Vadinar Power Company, two ports and 2,200 retail outlets, which are crucial for the refinery's operations. Out of the $13 billion, almost $2 billion is for the 58million-tonne deep draft Vadinar port that helps in importing crude and exporting finished products.

Russia's VTB Bank will lend Essar $3.9 billion to restructure debt, while Rosneft itself will pay about $3.5 billion to Essar.

"The said debt will no longer be regarded as Essar Group exposure since the company owing such debt gets transferred to the new shareholders Rosneft and the consortium of Trafigura and UCP", Essar Group's spokesperson told BusinessLine.

  • Zachary Reyes