Essar Oil exits CDR for Gujarat refinery, enters new loan pact

Move would allow company to distribute dividends and help it reach out to foreign lenders

Essar Oil, the country’s second-largest private sector refiner, has completed the process of exiting the corporate debt restructuring (CDR) loan facility set up in December 2004 to help construct its Vadinar refinery in Gujarat.

The refinery, which commenced commercial production in May 2008 with a capacity of 10.5 million tonnes per year (mtpa) and complexity of 6.1, now has a capacity of 20 mtpa and complexity of 11.8.

The CDR facility has been replaced with a new debt facility of about Rs 9,100 crore on commercial terms from a group of lenders. A consortium of 14 entities, including ICICI Bank, Pubjab National Bank, IFCI and IDBI Bank, has lent money to the company.

Suresh Jain, chief financial officer of Essar Oil, said the CDR exit would allow the company to distribute dividends and help it reach out to foreign lenders.

Managing Director and Chief Executive Officer Lalit Gupta said, “The CDR exit marks a significant step forward for Essar Oil. Complete stabilisation of our expanded capacity paves the way for us to move forward positively to maximise value for all our stakeholders. Capacity expansion and high complexity have already improved our profitability.”

The company, promoted by the Ruias, said the CDR exit would lead to greater operational and financial flexibility for the organisation. It added it had begun swapping its costly rupee debt with cheaper dollar loans. This, it said, would cut interest costs significantly, improve cash flow and strengthen the balance sheet. As part of moving towards dollar loans, Essar Oil has refinanced Rs 2,611 crore of rupee term loans into equivalent foreign currency debt of $481 million through external commercial borrowings (ECBs)/swaps.

The Reserve Bank of India had approved a limit of $2.27 billion for swapping the rupee debt with ECBs. Now, with the CDR exit over, the company would be able to swap the remaining rupee loans as well.