The Competition Commission of India (CCI) has given its go-ahead for the $13-billion (R86,100 crore) deal by Ruias’ promoted Essar Oil to sell its 98% stake in its flagship 20-million-tonne-per-annum refinery to a consortium led by Russia’s state-owned energy giant Rosneft along with Moscow-based private fund United Capital Partners and Switzerland-based commodity trading firm Trafigura.
The CCI after due inquiry concluded that the deal would not cause any adverse effect on competition in India, as a result of which this was one of the fastest CCI clearances for a deal of this size, sources told FE.
TT&A were legal advisers to Rosneft in obtaining CCI approval. Besides Vinod Dhall of TT&A, the legal team acting for Rosneft also included associates Avinash Amarnath and Kabyashree Chaharia.
The other advisers before the CCI included J Sagar Associates for the Trafigura-UCP consortium and Cyril Amarchand Mangaldas for Essar.
The Ruias-Rosneft deal marks one of the highest FDI inflows into India’s energy sector in the past more than five years. In 2010, Mukesh-Ambani promoted Reliance Industries sold 30% stake in 21 oil and gas blocks, including the much-touted KG-D6, to UK’s BP for $7.2 billion.
The multi-billion dollar deal would help Essar Group to cut down its mounting debt, which is to the tune of R88,000 crore at the group level. “We expect to reduce the overall debt in the group by about 50%,” Prashant Ruia, director of Essar, said in a recent interview, adding that the enterprise value of the transaction also covers the debt on the books of Essar Oil.
“Equity value will be on or a little higher than $5.8 billion at which the Essar Oil delisting has taken place,” Ruia explained.
Essar Group has taken loans from nearly 11 banks, including State Bank of India, ICICI Bank and Standard Chartered. The enterprise value of the deal — $12.9 billion — would also include Essar Oil’s debt of $4.5 billion, about $2-billion debt with the port and also $2.5-$3 billion dues on crude oil payments to Iran, say analysts.
The deal has been concluded on the sidelines of the last BRICS summit in Goa, in which Prime Minister Narendra Modi and Russian President Vladimir Putin took part. New Delhi’s interest in increasing economic cooperation with Kremlin was reflected in several rounds of talks between Modi and Putin.
The $12.9-billion all-cash deal is being framed under two transactions. The first sale and purchase agreement envisages the sale of 49% to Petrol Complex (a subsidiary of Rosneft Oil); the second envisages the sale of the remaining 49% to Kesani Enterprises (owned by a consortium led by Trafigura and United Capital Partners) at an enterprise valuation of Rs 72,800 crore ($10.9 billion).
An additional Rs 13,300 crore ($2 billion) will be paid for the acquisition of Vadinar Port which has world-class storage and import/export facilities.