You are here: Home » PTI Stories » National » News
Business Standard

Sale of Essar Oil significant for Indian banking system: Kotak

Press Trust of India  |  New Delhi 

The sale of is quite significant for the Indian system as the Rs 85,000-crore deal may release Rs 45,000 crore cash for Essar Group and help in deleveraging, says a report.

According to Kotak Institutional Equities, the sale of Essar Group's 'entire' holding in and Vadinar port to Rosneft, Trifugra and UCP will allay the market's concerns about Indian banks' exposure to Essar Group.



"The Rs 850 billion transaction will release Rs 450 billion of cash (our estimate) for Essar Group, which can be potentially used to repay debt of Rs 235 billion in Essar Global Holdings and reduce debt in financially stressed entities such as Essar Steel and Essar Power," Kotak Institutional Equities said in a research note.

According to the report, Indian banks have large exposure to Essar Group and following this deal their exposure may reduce significantly.

"We view the 98 per cent stake sale in and 100 per cent stake in Vadinar port by the Essar Group for a total consideration of Rs 850 billion (all-cash deal) as a very significant event for the Indian sector," the report said.

The report noted that the combined and coordinated efforts of the Indian government, RBI and banks will likely result in manageable levels of loss-given default (LGD) despite likely high NPLs in the country's system.

"Essar Group has total debt of Rs 1.3-1.4 trillion, with most of it raised from Indian banks. We note that, VTB, a Russian bank, will finance around Rs 260 billion of Essar Oil's debt (Rs 315 billion as per FY2015 annual report) as part of the deal, which will further reduce Indian banks' exposure to Essar Group," it said.

Meanwhile, Essar Group Director Prashant Ruia has said that that "we plan to utilise proceeds from the stake sale to deleverage the Group and pave the way for strategic consolidation and growth in other businesses. Deal will help Essar deleverage almost 50 per cent of its Rs 88,000 crore debt and substantially reduce interest costs.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

RECOMMENDED FOR YOU

Sale of Essar Oil significant for Indian banking system: Kotak

The sale of Essar Oil is quite significant for the Indian banking system as the Rs 85,000-crore deal may release Rs 45,000 crore cash for Essar Group and help in deleveraging, says a report. According to Kotak Institutional Equities, the sale of Essar Group's 'entire' holding in Essar Oil and Vadinar port to Rosneft, Trifugra and UCP will allay the market's concerns about Indian banks' exposure to Essar Group. "The Rs 850 billion transaction will release Rs 450 billion of cash (our estimate) for Essar Group, which can be potentially used to repay debt of Rs 235 billion in Essar Global Holdings and reduce debt in financially stressed entities such as Essar Steel and Essar Power," Kotak Institutional Equities said in a research note. According to the report, Indian banks have large exposure to Essar Group and following this deal their exposure may reduce significantly. "We view the 98 per cent stake sale in Essar Oil and 100 per cent stake in Vadinar port by the Essar Group for a ... The sale of is quite significant for the Indian system as the Rs 85,000-crore deal may release Rs 45,000 crore cash for Essar Group and help in deleveraging, says a report.

According to Kotak Institutional Equities, the sale of Essar Group's 'entire' holding in and Vadinar port to Rosneft, Trifugra and UCP will allay the market's concerns about Indian banks' exposure to Essar Group.

"The Rs 850 billion transaction will release Rs 450 billion of cash (our estimate) for Essar Group, which can be potentially used to repay debt of Rs 235 billion in Essar Global Holdings and reduce debt in financially stressed entities such as Essar Steel and Essar Power," Kotak Institutional Equities said in a research note.

According to the report, Indian banks have large exposure to Essar Group and following this deal their exposure may reduce significantly.

"We view the 98 per cent stake sale in and 100 per cent stake in Vadinar port by the Essar Group for a total consideration of Rs 850 billion (all-cash deal) as a very significant event for the Indian sector," the report said.

The report noted that the combined and coordinated efforts of the Indian government, RBI and banks will likely result in manageable levels of loss-given default (LGD) despite likely high NPLs in the country's system.

"Essar Group has total debt of Rs 1.3-1.4 trillion, with most of it raised from Indian banks. We note that, VTB, a Russian bank, will finance around Rs 260 billion of Essar Oil's debt (Rs 315 billion as per FY2015 annual report) as part of the deal, which will further reduce Indian banks' exposure to Essar Group," it said.

Meanwhile, Essar Group Director Prashant Ruia has said that that "we plan to utilise proceeds from the stake sale to deleverage the Group and pave the way for strategic consolidation and growth in other businesses. Deal will help Essar deleverage almost 50 per cent of its Rs 88,000 crore debt and substantially reduce interest costs.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

Sale of Essar Oil significant for Indian banking system: Kotak

The sale of is quite significant for the Indian system as the Rs 85,000-crore deal may release Rs 45,000 crore cash for Essar Group and help in deleveraging, says a report.

According to Kotak Institutional Equities, the sale of Essar Group's 'entire' holding in and Vadinar port to Rosneft, Trifugra and UCP will allay the market's concerns about Indian banks' exposure to Essar Group.

"The Rs 850 billion transaction will release Rs 450 billion of cash (our estimate) for Essar Group, which can be potentially used to repay debt of Rs 235 billion in Essar Global Holdings and reduce debt in financially stressed entities such as Essar Steel and Essar Power," Kotak Institutional Equities said in a research note.

According to the report, Indian banks have large exposure to Essar Group and following this deal their exposure may reduce significantly.

"We view the 98 per cent stake sale in and 100 per cent stake in Vadinar port by the Essar Group for a total consideration of Rs 850 billion (all-cash deal) as a very significant event for the Indian sector," the report said.

The report noted that the combined and coordinated efforts of the Indian government, RBI and banks will likely result in manageable levels of loss-given default (LGD) despite likely high NPLs in the country's system.

"Essar Group has total debt of Rs 1.3-1.4 trillion, with most of it raised from Indian banks. We note that, VTB, a Russian bank, will finance around Rs 260 billion of Essar Oil's debt (Rs 315 billion as per FY2015 annual report) as part of the deal, which will further reduce Indian banks' exposure to Essar Group," it said.

Meanwhile, Essar Group Director Prashant Ruia has said that that "we plan to utilise proceeds from the stake sale to deleverage the Group and pave the way for strategic consolidation and growth in other businesses. Deal will help Essar deleverage almost 50 per cent of its Rs 88,000 crore debt and substantially reduce interest costs.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard