Essar Oil scrip jumps 10% as Ruias seek higher valuation

The top brass of Essar Oil is currently in Russia to discuss the final contours of the transaction with Rosneft

The Essar Oil stock jumped 10 per cent on Thursday, as investors bet that the 49 per cent stake sale by the Ruias to Rosneft would be signed at a far higher valuation than the current market price.

The Essar Oil brass is in Russia to discuss the final contours of the transaction and the talks are underway on the valuation of Ruia’s stake. The Ruias own 90 per cent stake in Essar Oil and are seeking close to Rs 285 a share as compared to Rs 158 a share at the closing on Thursday. The valuation has not been confirmed by either of the companies.  The company’s shares up ran up 51 per cent this month.

It’s a win-win transaction for both, as while Essar Oil will get steady supply of crude oil from Rosneft, the latter will get an entry into the lucrative Indian market. Essar Oil has not commented on the impending transaction calling it “market speculation”.

The company’s total enterprise valuation is Rs 37,897 crore as on March 2015, as per Bloomberg statistics.  Bankers say the transaction can be announced any time this week depending on the negotiations, which started from Monday in Moscow.

Essar Oil owns and operates a refinery at Jamnagar in Gujarat. The company reported revenues of Rs 83,206 crore for the fiscal 2015 and made a profit of Rs 1,521 crore – riding on higher gross refining margins.