- Transaction includes - Rs 72,800 crore ($10.9 bn) for Essar Oil’s refining and retail assets, and - Rs 13,300 crore ($2 bn) for Vadinar port and related infrastructure
- This makes it India’s largest inbound FDI
- Essar Oil operates India’s second largest refinery and largest private sector oil retail network
- Vadinar Refinery contributes 9% of India’s refining output
- Essar Oil operates a pan-India network of 2,700 retail outlets
- The closing of the transaction is conditional upon receiving requisite regulatory approvals and other customary conditions. The Parties expect to obtain the relevant approvals before the end of this year.
Goa / Mumbai – India, 15 October 2016: Essar Energy Holdings Limited and Oil Bidco (Mauritius) Limited—companies incorporated and managed under the laws of Mauritius—the controlling shareholders of Essar Oil Limited (EOL) have entered into separate definitive agreements for the sale of 98% of EOL. The first sale and purchase agreement envisages the sale of 49% to Petrol Complex Pte. Ltd (a subsidiary of PJSC Rosneft Oil Company); the second envisages the sale of the remaining 49% to Kesani Enterprises Company Limited (owned by a consortium led by Trafigura) at an enterprise valuation of Rs 72,800 crore ($10.9 bn) (the “Transaction”). 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.
The business transaction was announced in the august presence of Mr Narendra Modi, Honourable Prime Minister of India, and Mr Vladimir Putin, Honourable President of the Russian Federation, at the BRICS Summit in Goa (India).
The all-cash deal encompasses EOL’s 20 million tonne refinery in Gujarat, India, and its pan-India retail outlets. The closing of the Transaction is conditional upon receiving requisite regulatory approvals and other customary conditions. The Parties expect to obtain the relevant approvals before the end of this year.
Investing in EOL, which operates one of the world’s most complex refineries and runs India’s largest private sector retail network, gives the new stakeholders a strong foothold in the Indian market that will witness robust demand growth for petroleum products in the long term. The growth for refined petroleum products in the Indian market for the next five years is expected to be in the 5%-7% range.
EOL’s value has also been strengthened by the integrated nature of its business and the strategic positioning of its assets. Its 20 million tonne oil refinery in Vadinar, which accounts for 9% of India’s total refining output, is supported by a 1,010 MW captive power plant, and complemented by a network of around 2,700 operating retail outlets. The additional Rs 13,300 crore that the new stakeholders have agreed to pay is for the 58 million tonne deep draft port in Vadinar that helps in importing crude and exporting finished products.
Rosneft Oil Company is the world’s largest petroleum company with revenues in excess of $80 billion. The Company’s main business activities include exploration & production, refining and product marketing in Russia and across countries in North America, Latin America, Europe, Asia and the Middle East.
Trafigura Group is one of the world's leading independent commodity trading and logistics group of companies with revenues of approximately $100 billion. United Capital Partners (UCP) is a large independent Russian private investment group with investments of over $3.5 billion in various industrial sectors.
The Transaction is the single largest tranche of foreign direct investment in India, and re-establishes the image of India as an attractive destination for foreign investments. Earlier in 2007, Essar Group, together with Hutchison Whampoa, brought Vodafone into India through an $11.1-billion transaction. With the current Transaction, this is the second instance that Essar has brought in world leaders in the sector to participate in the India growth story.
Essar Group Chairman, Mr Shashi Ruia, said: “It is a historic day for Essar. The transaction demonstrates our unique ability to build world-class assets and create immense value in our businesses. The monetisation of our stake in Essar Oil will help drive the next level of growth for our other businesses.”
Mr Prashant Ruia, Director, and Essar, said: “We have once again reinforced our unique expertise in project incubation, execution, value creation and monetisation. We have established world-class assets that have attracted the attention of leading global companies and investors. The deals we have done have led to an FDI infusion of more than $30 billion into India.”
Mr Igor Sechin, CEO, Rosneft, said: “This is a significant milestone for the Company. Rosneft is entering one of the most promising and fast-growing world markets. At the same time, this project provides unique opportunities for synergies with the existing assets of the Company and is consistent with Rosneft's enhanced presence in the fast growing markets of other APR countries, such as Indonesia, Vietnam and The Philippines.”
Mr Jeremy Weir, Chief Executive Officer of Trafigura, said: “This is an important and exciting investment. Essar Oil occupies a strategic position in the global oil market and owns world-class refining and infrastructure assets that will create multiple synergies with our trading business.”
Mr Ilya Sherbovich, Managing Partner of UCP, stated: “We are very pleased to reach an agreement to acquire shares of Essar Oil Limited. This is a top-tier asset operating in the promising Indian market, one of the largest and rapidly developing economies in the world. The announced transaction establishes a strategic partnership between our investment consortium members. Deal participants have extensive operational and financial expertise, which we believe will help to unlock significant value and provide strong financial results for all investors.”
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Notes to editors
About Essar Global Fund Ltd
Essar Global Fund Limited (EGFL) is a global investor, controlling a number of world-class assets, focused on India, and diversified across the core sectors of Oil & Gas, Steel, Power, Ports, Projects, Shipping, Mining, BPO and other services. The Fund’s portfolio companies have aggregated revenues of about Rs 2 lakh crore and employ over 60,000 people.
Rosneft is the leader of Russia’s petroleum industry and the world’s largest publicly traded petroleum company. Company’s main activities include prospecting and exploration of hydrocarbon deposits, oil, gas and gas-condensate production, upstream offshore projects, processing, as well as oil, gas, and product marketing in Russia and abroad. The Company is included in the list of strategic companies and organizations of Russia. Company’s largest shareholder (69.50% of the equity) is ROSNEFTEGAZ OJSC, fully owned by the Russian Government, while BP holds 19.75% of shares, one share belongs to the state represented by Federal Agency for State Property Management, whereas the remaining shares are free floating. www.rosneft.com
About United Capital Partners (UCP)
United Capital Partners (UCP) is an independent, private investment group established in 2006 to manage the assets of its partners and co-investors. UCP invests in high-potential private companies and in liquid securities traded on domestic and international markets. UCP has a successful investment track record in the following industries: FMCG and retail, financial infrastructure and services, internet technologies, high-tech materials production, heavy machinery, oil & gas and petrochemicals. www.ucpfund.com
Founded in 1993, Trafigura is one of the largest physical commodities trading groups in the world. Trafigura sources, stores, transports and delivers a range of raw materials (including oil and refined products and metals and minerals) to clients around the world. The trading business is supported by industrial and financial assets, including 48.8 percent owned global oil products storage and distribution company Puma Energy; global terminals, warehousing and logistics operator Impala Terminals; Trafigura's Mining Group; 50 percent owned DT Group which specialises in logistics and trading; and Galena Asset Management. The Company is owned by over 600 of its almost 5,300 employees who work in offices in 37 countries around the world. Trafigura has achieved substantial growth over the last ten years, growing turnover from USD12 billion in 2003 to USD97.2 billion in 2015. The Group has been connecting its customers to the global economy for more than two decades, growing prosperity by advancing trade. www.trafigura.com
Manish Kedia ,
Senior Vice President –Corporate Affairs, Essar
Phone: +91 98197 30092,
Ravi Muthreja ,
Vice President - Corporate Communication, Essar
Phone: + 91 99301 34566,
Email : Ravi.Muthreja@essar.com
Anupam Chaturvedi, Adfactors PR
Mobile: + 91 9820026830,
International communications- Rosneft
Phone : +7 9853030146
Email : firstname.lastname@example.org
Ms Victoria Dix, Trafigura’s Press Office
Phone : +41 (0) 22 592 4528 or
Email : email@example.com
Irina Lanina, UCP communications
Phone : +7 (916) 907 50 79
Email : firstname.lastname@example.org
Essar Global Fund Limited (“Essar”) is a global investor, controlling a number of world-class assets, mainly focused in India, diversified across the core sectors of Oil & Gas, Steel, Power, Ports, Projects, Shipping, Mining, BPO and other services. The Fund’s portfolio companies have aggregated revenues of about Rs 2 lakh crore and employ over 60,000 people.
Essar’s business model is all about incubating, nurturing, scaling and monetising. Its businesses have always attracted the attention of global players—be it Vodafone, or Teleperformance, or Rosneft & the UCP-Trafigura consortium—as well as premium valuations. Essar has also made sure that it monetised its businesses at the right time, choosing significant inflection points in its evolution as an organisation to use the proceeds from the monetisation to reinvest in the next phase of growth. Essar businesses have attracted a consolidated FDI infusion of about $30 billion, which is the largest for a business group. Some of the assets that Essar grew to world-class scale—and monetised at landmark valuations and at opportune stages in its evolution—were Hutchison-Essar and Aegis. While Hutchison-Essar was monetised at an enterprise valuation of $18 billion, Essar sold the US, Costa Rican and Philippine operations of Aegis for $610 million.
Essar’s strategy is to not just set up a business or a manufacturing facility, but to invest in the complete value chain so that input costs can be brought down and dependence on external vendors minimised. In fact, Essar Projects, an Essar group company, has built every Greenfield project for Essar, managing end-to-end execution, right from Engineering and Procurement to Construction and Operational Maintenance. Essar also invested in high-end technology, safety measures and sustainable initiatives to make its assets truly world-class in scale, complexity and stature. The assets are completely backward integrated through setting up of captive ports, power plants and other supporting infrastructure, as well as forward integrated to value-add to the product portfolio and capture niche markets.
About the transaction
- Largest single tranche of inbound foreign direct investment
- Transaction pegs Essar Oil’s enterprise value at Rs 72,800 crore ($10.9 billion) plus an additional Rs 13,300 crore ($2 billion) to be paid for Vadinar Port
- Essar Global Fund decided to monetise Essar Oil, one of its key assets, after Rosneft and many other overseas firms evinced a keen interest in picking up a stake in the company
- Rosneft, the Russian government owned integrated oil company, has picked up a 49% stake in Essar Oil Limited
- Consortium of Trafigura and UCP pick up another 49% stake
- All-cash deal expected to close in Q1 2017, subject to all necessary approvals
- Essar plans to utilise proceeds from the stake sale to deleverage the Group and pave the way for strategic consolidation and growth in other businesses
- There is no non-compete fee under the transaction with Rosneft
- Deal in line with government’s vision to attract high ticket foreign investments into India
- Transaction includes 20 MTPA refinery at Vadinar (Gujarat) and all supporting infrastructure
- Deal demonstrates the ability of Indian businesses to attract overseas investment and indicates foreign players’ belief in the India growth story
- Transaction also gives Rosneft and the UCP-Trafigura consortium access to Essar Oil’s pan-India network of over 2,700 fuel retail outlets
- Deal will help Essar deleverage almost 50% of its Rs 88,000 crore debt and substantially reduce interest costs
About Essar Oil
- Essar Oil was set up using an equity capital of about Rs 9,000 crore in the 1990s. The transaction values the Company at over 8 times that cost. This is an indication of the phenomenal value that has been created through strategic investments
- Essar Oil’s 20 MTPA refinery at Vadinar is a world-class refinery across several aspects, like performance, safety compliance, engineering and plant complexity. In a 2014 benchmark study by Solomon, Essar Oil was in the first quartile for 15 out of 26 performance indicators
- Vadinar Refinery can handle all kinds of crude, including the toughest crudes
- It produces and exports petroleum products meeting Euro IV and Euro V standards
- Vadinar refinery production constitutes 9% of India’s refining output
- Essar Oil currently has more than 2,700 retail outlets—the largest in the private sector—and is setting up an additional 2,000 outlets, which are in various stages of implementation
- Essar Oil Limited is a privately held company after a complete delisting from the bourses in 2015. Only 2% of the equity remains with public shareholders who had not participated in the delisting
- Refinery was commissioned in 2008
- Integrated infrastructure of power plants, port and retail assets provides full flexibility to the refinery
- Refinery has consistently been performing at above 100% capacity utilisation
- Within four years of commissioning, refinery capacity increased from 10.5 MTPA to 20 MTPA, while complexity doubled from 6.1 to 11.8
- Refinery’s Gross recovery Margins (GRM) have been consistently higher than its peers
- Essar Oil has the best safety record in the industry, with more than 8 years without LTI (Lost Time Injury)
- Essar Oil has the requisite land and has obtained approvals for all possible expansion activities, including doubling of refinery capacity and the setting up of a petrochemical complex
- Essar Oil’s Vadinar complex was built around a natural deep-draft port, with a liquid cargo terminal. Facilities on site include two jetties for handling liquid petroleum products, tanks for storage of crude oil and finished petroleum goods, and rail and road gantries for dispatch of petroleum products. The Vadinar port has been the best performing port under the Kandla Port Trust for two consecutive years, and has just completed 10 years of operations
- Essar Oil has registered consistent Y-on-Y growth in retail sales over the last few quarters
- Essar Oil Vadinar refinery has produced higher proportion of middle & light distillates Y-on-Y, ensuring better margins
- One third of the 3,000-acre Vadinar complex is reserved for a green belt that has 4 lakh trees
- Essar Oil’s Vadinar refinery was voted among the top 20 most energy efficient units in India by CCI. The Company was ranked among India’s Carbon Disclosure Leaders for 2015 by CDP
- Essar Oil has a retail presence in 28 states & UTs; its products marketed through 58 supply locations
- Not just petrol & diesel, Essar Oil also manufactures LDO, Sulphur, FO, Bitumen & PetCoke