Ukraine crisis: After Trafigura, UCP looks to sell stake in Nayara Energy

After Singapore-based commodity trading firm Trafigura Group, Russian investment firm UCP has decided to sell its stake in Indian refiner Nayara Energy, even as Western sanctions impact the fundraising plans of the company. Trafigura Group and UCP together hold 49.13 per cent in equal proportions in Nayara.

 A banking source said both shareholders have initiated talks with a clutch of investors but because of the ongoing war in Ukraine, investors are not coming forward. “There is no taker for the stake in India or overseas as investors are worried about the impact of sanctions on the company’s existing operations,” said a banker.

When contacted, a Trafigura spokesperson said there was no update on the sale process. “As detailed in Trafigura’s 2021 annual report, the company has decided to sell its equity investment in Tendril Ventures (Nayara Energy),” the spokesperson said. An email sent to UCP in Russia and Nayara Energy did not elicit any response.

Nayara’s shareholders include Russian energy major Rosneft and a consortium led by Trafigura and UCP. A minuscule stake is held by the erstwhile minority shareholders of Essar Oil. In 2017, Rosneft, UCP, and Trafigura acquired the Indian refiner from the Ruia family for $12.9 billion, giving them a foothold in the world’s fastest-growing market.

The company owns India's second-largest single location refinery at Vadinar, Gujarat; the facility has a capacity of 20 MMTPA (equivalent to 140 million barrels). The company also has a presence in oil retailing, with 6,496 operational retail outlets in various parts of India, as of December 31 last year, and plans to expand retail outlets to 7,300 by December this year.

The firm is planning to spend Rs 4,262 crore in capex in the ongoing financial year. Of this around, Rs 4,000 crore is towards the polypropylene project while the balance is towards routine and maintenance capex, which will be funded through a mix of debt and equity, according to a statement by CARE Ratings.

After the company’s debt instruments were downgraded after the war in Ukraine, the company had to pay a higher interest rate on its non-convertible bonds, according to the terms of the debt agreement, which triggers higher rates for any downgrade.