Essar Oil deal done, hurdles stay for group's steel, power firms

The Rosneft deal will reduce banks’ exposure to the Essar group but the challenge remains in resolution of problems faced by the group’s steel and power businesses.

Bankers said after the Essar Oil transaction, lenders’ exposure to the group had declined on paper because the new owners would take over the liability for loans to the company. 

Chanda Kochhar, managing director and chief executive officer, ICICI Bank, said the bank welcomed the acquisition of Essar Oil by a Rosneft-led consortium. ICICI Bank has played a key role throughout the process of completion of the transaction since it was announced last October. The deal reduces ICICI Bank’s exposure to the Essar group by about 50 per cent.

ICICI Bank had extended loans at the holding company level as well as to Essar Oil. The bank, however, did not disclose the details of its exposure.  

An IDBI Bank executive said the bank’s exposure to the group was expected to decline by Rs 3,000 crore. 

Lenders are now working for a resolution of loans to the Essar group’s steel and power businesses. On a direction by the Reserve Bank of India, banks have taken Essar Steel to the National Company Law Tribunal (NCLT). An interim resolution professional has been appointed to oversee the insolvency proceedings.

“Out of the deal amount ($12.9 billion), $5 billion debt at the group level will be settled. Another $6 billion debt of Essar Oil will be taken over by the Rosneft consortium,” Prashant Ruia, director, Essar group, said here on Monday. 

Representatives of the Rosneft-led consortium pegged Essar Oil’s debt at $5 billion.  
 

The Essar group said the Rs 70,000 crore debt reduction included Essar Energy’s Rs 32,000 crore payout to lenders and another Rs 34,400 crore in Essar Oil, Vadinar Oil, and VPCL which would now become non-Essar exposure.

A further Rs 4,000 crore has been used to repay Indian lenders at the operating company level.