Essar Oil jumps after exit from CDR mechanism

The company made the announcement after market hours on Thursday, 4 April 2013.

Meanwhile, the S&P BSE Sensex was up 1.05 points or 0.01% at 18,510.75.

On BSE, 99,000 shares were traded in the counter as against average daily volume of 12.41 lakh shares in the past one quarter.

The stock hit a high of Rs 83.75 and a low of Rs 79.40 so far during the day. The stock had hit a 52-week high of Rs 96.15 on 4 February 2013. The stock had hit a 52-week low of Rs 46 on 31 August 2012.

The stock had outperformed the market over the past one month till 4 April 2013, surging 8.18% compared with the Sensex's 1.95% fall. The scrip had also outperformed the market in past one quarter, jumping 8.7% as against Sensex's 6.44% fall.

The large-cap company has equity capital of Rs 1427.59 crore. Face value per share is Rs 10.

Essar Oil (EOL) said that the corporate debt restructuring (CDR) loan facility for the construction of its Vadinar refinery in Gujarat has been replaced with a new debt facility of about Rs 9100 crore on commercial terms from similar group of lenders.

Mr Lalit Gupta, Essar Oil Managing Director and Chief Executive Officer, said, "The CDR exit marks a significant step forward for Essar Oil. Complete stabilising of our expanded capacity pave the way for us to move forward positively to maximize value for all our stakeholders. Capacity expansion and high complexity has already improved our profitability".

Mr Suresh Jain, Chief Financial Officer, Essar Oil, said, "We are thankful to our lenders for their continued faith in us. The CDR exit will lead to greater operational and financial flexibility for the organization. We have begun the process of swapping our costly rupee debt with cheaper dollar loans that will lower our interest cost significantly, improve our cash flow, and strengthen the balance sheet".

In addition, as part of dollarization of its rupee term debt, EOL has refinanced Rs 2611 crore of rupee term loans into equivalent foreign currency debt of $481 million through ECBs/swaps, the company said. This will help in reduction of long-term interest cost, it added. The company had received RBI approval of $2.27 billion to replace its high cost rupee debt with ECBs, and now with the CDR exit, the company will be able to refinance the remaining rupee loans to ECB, EOL said in a statement.

Vadinar refinery, which commenced commercial production in May 2008 with a capacity of 10.5 million metric tonnes per year (220,000 barrels per day) and complexity of 6.1, now has a capacity of 20 mmtpa, or 4.05 lakh bpd and complexity of 11.8. This makes the fully integrated refinery India's second largest single location refinery and amongst the most complex globally. With increased complexity, Essar Oil is able to take over 85% of ultra heavy and heavy crude in its crude diet and yet produce higher grade products like Euro IV and Euro V compliant gasoline and gasoil to cater to the domestic and international markets.

Essar Oil reported net profit of Rs 32 crore in Q3 December 2012, compared with net loss of Rs 362 crore in Q3 December 2011. Gross revenue jumped 86% to Rs 25909 crore in Q3 December 2012 over Q3 December 2011.

Essar Oil is a fully integrated oil and gas company of international scale with strong presence across the hydrocarbon value chain from exploration and production to refining and oil retail. Essar Oil owns India's second largest single site refinery having a capacity of 20 MMTPA and complexity of 11.8, which is amongst the highest globally. It has a portfolio of onshore and offshore oil and gas blocks with about 1.7 billion barrels of oil equivalent in reserves and resources. There are more than 1,600 Essar-branded oil retail outlets in various parts of India.

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