Essar to further cut down debt by 70% in last leg of deleveraging exercise

The Ruia family-owned Essar Group has embarked on the final leg of its deleveraging exercise with plans to cut down its residual debt by 70 per cent to about Rs 12,000 crore as it looks to rebuild the conglomerate post-oil and steel business selloffs.

From Rs 1.83 trillion of debt in FY17, the group brought down the debt by a staggering Rs 1.40 trillion over the last three years. Now it plans to cut residual debt from Rs 42,000 crore to about Rs 12,000 crore, according to a mailer Essar sent to policymakers and bureaucrats.

Post the proposed reduction of debt in the power business by over 60 per cent (Rs 12,000 crore), and similar deleveraging across its portfolio businesses, Essar would have almost cleared all its long-term debts.

 

The remaining indebtedness is for working capital in fully operational assets.

The Group said it is "poised to embark on a new phase of growth while driving growth in its existing portfolio."

Despite selling the oil refinery to Russia's Rosneft and partners and losing the steel business in insolvency proceedings, the group currently has interests in oil and gas, ports, power, shipping and mining projects in India and overseas that give revenue of Rs 1 trillion.

Essar in the mailer said, revenues are projected to rise from Rs 94,000 crore in FY19 to Rs 98,000 crore in the current fiscal and then to Rs 1,01,000 crore in 2020-21 and Rs 1,04,000 crore in the year thereafter.

Indicating it has put the past behind, Essar said it is armed with a substantially lighter balance sheet after it took a conscious call of reducing its debt in response to evolving domestic and evolving economic scenario.

"Our strong portfolio of companies consistently generates healthy and sustainable earnings and have combined revenue of Rs 1,00,000 crore ($14 billion)," it said.

Essar said it has made capital investments of over Rs 2 trillion (about $28 billion) in sectors like ports, steel plants, oil refining and fuel retailing, oil and gas exploration & production, power generation & transmission, mining, shipping, and telecom, with substantial equity from the Essar Group.

The Group said it will continue to use its entrepreneurial skills, a vast pool of human resources, and decades of experience and innovation in pursuing fresh opportunities and creating value for all its stakeholders.

The Essar letter was jointly signed by promoters Ravi Ruia and Prashant Ruia.

Many years back, the Group, which built India's second-largest pan-Indian telecom operations with Hutchison, sold its 33 per cent stake to Vodafone for $5.4 billion (Rs 28,827 crore).

Later it sold its 20 million tonnes oil refinery at Vadinar and over 3,500 petrol pumps to Rosneft and partners for $12.9 billion (Rs 86,000 crore). Its BPO business, Aegis was monetised for $910 million (Rs 5,660 crore).

Its steel business, which was made up of 10 million tonnes per annum plant and 20 million tonnes of pellet making capacity, went for $6 billion (Rs 42,000 crore) in bankruptcy proceedings to recover unpaid loans.

Essar said the challenges it faced over the years did not stop it from creating world-class assets.

The greenfield assets built by it have attracted significant foreign direct investment (FDI) of $40 billion, which is reflective of the superior and world-class quality of its assets.

The Essar Oil-Rosneft deal alone saw over Rs 86,000 crore of FDI, the country's largest until date, it claimed.

Essar said it currently owns businesses in the core sectors of energy, metals & mining, infrastructure, services and technology.

In the energy sector, Essar has commercial interests in oil, gas and coal bed methane exploration and production in India, Vietnam and Nigeria; oil refining and retailing in UK and power generation in India and Canada.

In infrastructure, it operates ports and terminals in India, UK and Africa, and has commercial interests in turnkey project construction in India and the Middle East.

In the metals and mining sectors, the Essar Group has exposure in iron ore mining and pelletisation and coal mining in the USA and Indonesia. In new-age services, Essar said it has business interests in digital solutions and customer experience platforms in India, Europe, and USA.

"We have fulfilled our corporate social responsibility with focused community uplift programmes in areas of livelihoods and entrepreneurship, women's empowerment, health, education, infrastructure and environment.

The positive impact of these initiatives makes a difference in the lives of 500,000 people from 500 villages across 8 Indian states," it said in the letter.

Reminiscing the last 50 years of its journey, Essar reflected that it had to face several business and regulatory challenges along the way in its flagship steel and power businesses, "which particularly impacted us".

"Committed gas supply contracts for the Essar Steel Complex were withdrawn in 2012 and allotted coal mines for power plants were canceled in 2014, leading to a partial closure of some of our prime operating assets," it said.