Ruias-owned Essar Energy Ltd today announced plans to raise about $2.5 billion (over Rs 11,250 crore) through an initial public offering of shares, the largest overseas IPO by an Indian firm, in the UK.
Upon completion, the billionaire promoters Ruias' Essar Group would hold a minimum of 75 per cent in Essar Energy, and would be listed on the London Stock Exchange, Essar Energy Vice Chairman Prashant Ruia said.
The stake sale to institutional investors in the UK would be the largest ever by an Indian after Anil Ambani group's Reliance Power that currently holds the record of raising Rs 11,800 crore two years ago.
Essar Energy has initiated the process of seeking regulatory clearances in the UK for the IPO, proceeds of which would be used for expansion of its refinery, setting up more power projects and developing coal-bed-methane (CBM) and other energy assets.
Essar Energy intends to apply for its shares to be admitted to the official list of the Financial Services Authority in the UK and for trading on the London Stock Exchange's main market for listed securities. On completion of the offer, it is expected that Essar Energy will be considered for inclusion in the FTSE 100 Index.
Essar Energy Holdings has 88.4 per cent stake in Essar Oil -- the company, listed on the Bombay Stock Exchange of India, that owns a 10.5 million tonnes refinery at Vadinar in Gujarat and an array of oil properties in India and abroad.
Asked if Essar Oil would be delisted, Ruia said, "We have no plans to delist Essar Oil. It would continue to be listed on BSE.
"This will be a landmark event both for Essar Group and Essar Energy... At the time of the offer we would have already $2 billion of capital in Essar Energy... A London listing gives us an excellent platform to showcase the potential of the Indian market to the world," Essar Energy Chairman Ravi Ruia said.
Prashant Ruia said, "now is the right time to open the business to global capital to fuel future growth ambitions and address India's significant energy deficit. This offer will help us bridge that deficit while allowing international investors access to India's growth story."
Essar Energy, a holding company for the Group's energy businesses, plans to offer 20 to 25 per cent of the enlarged share capital of Essar Energy to institutional investors in UK, Ruia said. Asked by when Essar Energy would be listed on the LSE, he said "in coming weeks".
The proposed IPO would give Essar's energy business a valuation of about USD 10 billion (nearly Rs 45,000 crore). Essar Energy currently intends to use the net proceeds of the offer to fund the equity portion of its expansion projects.
He said the company would not use IPO proceeds to fund the buyout of three European refineries of Royal Dutch/Shell. Essar is in talks to buy Shell refineries at Stanlow in the UK, and Heide and Harburg in Germany.
"We believe LSE is one of the premium stock exchanges and will give significant access to international capital market," he said, adding that the issue currently is only for institutional investors. "In future, it (the issue) will be open to all secondary market players," he said.
The proceeds are aimed at funding the equity component of the existing growth projects for setting up power generation capacity, exploration and development of oil and natural gas blocks and completion of first phase of expansion of Vadinar refinery project to take its capacity to 18 million tonnes.
The completion of the phase I and II power projects as also acquisition and development of captive coal mines to raise Essar Energy's total capacity to 11,470 MW would account for the bulk of the deployment.
Essar Energy operates its oil and gas businesses through Essar Oil, a listed entity in India with a public float of 11.42 per cent. The Ruia brothers, with a fortune of $13 billion, are ranked fifth in the Forbes magazine's list of India's richest.
Essar group needs about Rs 40,000 crore over the next 3-4 years for expansion of its energy business. It needs about Rs 20,000 crore for nearly doubling power generation capacity to 11,470 MW. Besides, it is already working on expanding its Vadinar refining capacity to 18 million tonnes at a cost of $1.6 billion.
In the next phase, the capacity would be expanded to 34 million tonnes at an investment of about $4 billion. Besides, the group is expediting work on exploration and production businesses where it plans to invest about Rs 4,000 crore in 3-4 years.
The Essar Group has interest in businesses ranging from steel and energy to power, communications, shipping and logistics.
