Ruias to sell 49% in Essar Oil to Russia's Rosneft for Rs10,500 cr: report

Ruia group oil producer Essar Oil and Gas will sell 49 per cent stake to Russian oil and gas giant Rosneft for about Rs10,500 crore and a deal is likely to be announced today, according to reports.

At current market cap of around Rs21,163 crore, a 49 per cent stake in the company could fetch anything around Rs10,500 crore.

A team of senior officials of the Essar group, led by promoter Prashant Ruia, is in Moscow to close the deal. Reports quoting bankers associated with the talks said the talks are now centered around valuation and a deal can be expected any moment.

A deal between the Essar Group and Rosneft has been in the works for the past few months, following last year's crude supply deal.

Rosneft had, last year, signed an initial deal to supply 10 million tonnes a year (2,00,000 barrels per day) of oil to Essar Oil for the next 10 years.

The crude supply deal has been financed by a $1-billion line of credit extended by Russian bank VTB to Essar.

Essar had at that time offered a strategic stake of 50 per cent minus one share in Essar Oil to Rosneft, sources at the Russian company were quoted as saying.

The Ruias, along with Essar Energy Plc, own 90 per cent stake in Essar Oil. A deal with Rosneft will make the Ruias a minority shareholder in Essar Oil.

The transaction will also lead to an open offer for minority shareholders, as per the Securities and Exchange Board of India's takeover norms.

On Monday, the Essar Oil stock closed at Rs146, up 4.72 per cent. In the past four trading sessions, the stock had soared 43 per cent, as speculators bet on an imminent transaction. The company's total market value stood at Rs21,163 crore as of Monday.

A deal will provide Rosneft with a secure market outlet for oil and oil products, while Essar will secure reliable and stable supply of oil and oil products for its refining facilities.

Essar Oil runs a refinery at Vadinar in Gujarat, with an annual capacity of 20 million tonnes. It also owns the Stanlow Refinery, with a capacity of 296,000 barrels a day, near Liverpool in England. Essar Oil currently meets 35-40 per cent of crude oil requirements at Vadinar from West Asia and 15-20 per cent from domestic suppliers, with the rest coming from South America.

Together Essar Oil has about 700,000 barrels per stream day (bspd) of global crude-refining capacity at Vadinar and Stanlow.

Besides, Essar Oil operates a network of over 1,400 retail outlets across India, with another 600 under various stages of commissioning.

Essar Oil reported a 13 per cent fall in its gross revenue for the 2014-15 fiscal at Rs92,983 crore against Rs1,07,190 crore in 2013-14. Its net profit, however, stood significantly higher at Rs1,521 crore, against Rs126 crore in FY14. The rise in profit was primarily due to high gross refining margins of about $10 a barrel.

Essar also has a global portfolio of onshore and offshore oil and gas blocks, with about 35,000 sq km available for exploration.