India’s Essar Group mulls equity sale to raise US$3bn

BLOOMBERG

Tue, Mar 09, 2010 - Page 10

Essar Group, owned by Indian billionaires Shashi and Ravi Ruia, plans to raise US$3 billion overseas to fund acquisitions and expand its oil, power and steel businesses, two people familiar with the matter said.

The money may be raised through debt or sale of equity in Essar Energy Ltd, a holding company for the group’s energy businesses, one of the people said, asking not to be identified because the plan isn’t final. A decision on the fund-raising may be taken in six weeks, the person said.

Indian companies, including Reliance Industries Ltd and Bharti Airtel Ltd, are bidding for assets overseas to take advantage of cheaper valuations after the worst global financial crisis in 70 years.

Essar is in talks to buy three Royal Dutch Shell PLC oil refineries and is acquiring steel plants and coal and iron ore mines across the world to compete with Reliance, ArcelorMittal and other rivals.

“They’re looking to acquire a stake in Shell’s three refineries, so this could be an attempt to raise more money to do that,” said Swarnendu Bhushan, a Mumbai-based analyst for HDFC Securities Ltd.

Essar Oil Ltd, which has a market value of US$3.8 billion, rose 3.5 percent to 144.85 rupees at 10:52am in Mumbai trading.

The stock has advanced 133 percent in the past year, exceeding the benchmark Sensitive Index’s 106 percent gain.

The Ruia brothers, together the fifth-richest in India according to Forbes magazine in November, are considering listing shares of Essar Energy on the London Stock Exchange, the two persons said. There was no final decision yet, they said.

Essar may raise US$3 billion from the listing, the Financial Times reported yesterday, without saying where it got the information. The group has appointed JPMorgan Chase & Co and Deutsche Bank AG as advisers for the listing, the report said.

Essar was planning an US$8 billion London share sale for its oil and power business, the Sunday Telegraph reported on Sunday, citing an unidentified person.

“Essar Group is always looking at a range of different funding options but has not yet made any specific decision with regards to its future financing,” the Mumbai-based group said in an e-mailed statement yesterday.

“The group works with a range of financial advisers to assist the group,” the statement said.

The Essar Group bought Trinity Coal Corp in West Virgina for US$600 million to help lock in raw materials with coal and iron ore prices poised to rise as the global economy recovers, chief executive officer Prashant Ruia said on Saturday.

The group may sell stakes in its oil and shipping units as part of its expansion plan, Ruia said in October.