Do you have plans to re-enter the refining space?
We have not exited the oil and gas business. We still have coal-based methane. We still have Essar Oil UK refinery. We don’t have any plans to re-enter the refining and distribution business.
Are there any tax implications for this deal?
Tax implications are based on the laws of the land. Part of it (the deal) will be in India and part will be in Mauritius. Based on the laws, whatever tax is applicable will have to be met. It’s too early to determine.
There’s confusion regarding the non-compete agreement. Is it for three years or forever?
We have already issued a clarification that it is for three years.
You have reduced Rs70,000 crore worth of debt at the group level. How much would the outstanding consolidated debt be?
We have said Rs70,000 crore is more than 50%, the balance will be less. The key part that has been missed is Essar’s strength to create world-class assets, starting from scratch in core sectors. We did that in telecom. We made certain investments over a period of 10 years and then we exited after selling to Vodafone. We made 10X return on our investment. We did that with Aegis. We decided to exit, and we got 5X returns. Now we have done it in oil. When we did the IPO (initial public offering) in 1995, our market cap at that time was Rs2,000 crore. Now we have exited. The final number is Rs50,400 crore. Our strength is our ability to build an asset, scale it and make it a global facility. If the time is right and if the right thing to do is exit, then you exit.
But weren’t these exits under duress?
There is no duress. None of the debt associated with Essar Oil was in difficulty. No banker had to take a haircut of even one rupee. The company has performed exceptionally for the past 15 years. We have had challenges in the steel portfolio. But that problem is not getting addressed with this. But the corollary is we have used the proceeds from the sale to de-leverage the group.
When you exited telecom, you had reinvested in some of the other businesses...
That is what we are saying here also. Now, with a de-leveraged balance sheet, we have the ability to grow the rest of the portfolio. This is the flexibility we now have.
At the time of signing the deal in October 2015, you said Essar Steel will be the next crown jewel in the Essar group portfolio. Why then are you not looking to invest the deal proceeds in the company?
Essar Oil was 25% of the group portfolio. Now we have got the remaining 75% of the portfolio. We are going to invest in that portfolio to grow and consolidate.
What are you going to focus on?
We have got oil and gas, steel, ports, power. The ability to grow in power is limited because of the surplus in the market. We are looking at the whole set. We had to consolidate, monetise and complete the capital investment programme of Rs1.2 lakh crore (Rs1.2 trillion), that phase is over. Now we are looking at the next phase.
Every group goes through cycles. We were in investment phase in 2010-13 when we kicked off all projects. That was one phase of the group. Last three years was consolidation, monetisation, and partly deleveraging.
So the monetisation phase is over?
It’s completely over.
What will be consolidated debt to Ebitda or debt to equity ratio?
The group’s assets will be about $17 billion and group revenue will be about $15 billion after Essar Oil goes.
What is happening at Essar Steel?
We are in the IBC (insolvency and bankruptcy code) process. We will respect the process. We will provide a resolution plan as we had provided earlier, which we gave to Indian lenders. We hope it will be successful. We hope we can restructure the business.
Will you provide the same resolution plan or a different one?
It’s too early to say.
Now that the deal is done, does it give you greater flexibility?
I have the flexibility now to invest and provide a plan.
Are you confident of retaining control of the firm?
We are confident that we will provide a resolution plan and respect the process. If we are providing a resolution plan which is the best plan, we will retain control. We are confident of what we are trying to do.
Are you looking to restructure debt in Essar Power?
There is no debt restructuring. One or two projects in the power portfolio are facing issues faced by industry. Whatever happens to the rest of the industry will happen there. Those decisions will be taken by industry over the next 6 months. We will follow that. Rest of the portfolio is doing fine.