India’s Essar Oil to be acquired for $12.9bn by Rosneft and Trafigura

In what is the largest FDI deal in Indian history, Russian petroleum giant Rosneft and Dutch-based Trafigura Group have acquired 49% each in India’s Essar Oil Limited at a total sum of INR 72,800 crore ($10.9 billion).

Apart from the $10.9 billion deal, an additional INR 13,300 crore ($2 billion) will be paid for the acquisition of Vadinar Port, located in Gujarat’s Devbhoomi Dwarka district, which has been used for importing crude oil and exporting finished petroleum products.

Headquartered in Mumbai, Essar Oil, a subsidiary of an Indian conglomerate Essar Group, is considered as the second largest refinery and largest private sector oil retail network in India.

Essar Oil Acquisition News

Separate definitive agreements were signed by the controlling shareholder duo of Essar Energy Holdings and Oil Bidco, the parents of Essar Oil, with the Russian and the Dutch company today.

Rosneft Oil Company has agreed to buy 49% of Essar Oil through its subsidiary Petrol Complex.

The other 49% stake in Essar Oil was acquired by Kesani Enterprise Company which is owned by the Trafigura-led consortium which includes United Capital Partners (UCP).

It has to be noted that a foreign company can only invest up to a maximum of 49% in Indian companies as per the FDI (foreign direct investment) rules in the country.

Latest Essar Oil News

Essar Group chairman and co-founder 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.”

As part of the all-cash deal, the foreign companies will acquire Essar Oil’s 20-million tone refinery in Gujarat along with its retail outlets across India. Closing of the deal is subject to approval of customary regulations in the respective nations which are expected to be cleared by the year end.

Essar Group director Prashant Ruia 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.”

The Essar Oil acquisition deal was announced on the occasion of the ongoing BRICS Summit in Goa in the presence of Indian Prime Minister Narendra Modi and Russian President Vladimir Putin.

Through the acquisition, Rosneft and Trafigura are expected to get a strong foothold in the Indian market where refined petroleum products are likely to grow by 5-7% in the next five years.

Essar Oil’s oil refinery, backed up by a 1,010MW captive power plant, produces 9% of India’s total refining output. It has a network of about 2,700 operating retail outlets pan India.

Rosneft Essar Deal

Its new acquirer Rosneft Oil Company with revenues over $80 billion is easily the largest petroleum company in the world.

Rosneft Oil Company CEO Igor Sechin 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.”

Trafigura Essar Deal

Another acquirer of Essar Oil, the Trafigura Group with revenues of around $100 billion, is among the leading independent commodity trading and logistics group of companies globally.

Trafigura Group CEO Jeremy Weir 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.”