More than two years on, Nayara has transformed Essar’s entire debt profile, bringing down the count of long-term lenders from 25 to eight
In August 2017, Nayara Energy had acquired debt-ridden Essar Oil from the Ruias. It took nearly seven months to pay off the debt before the exercise to restructure the company began. More than two years on, Nayara has transformed Essar’s entire debt profile, bringing down the count of long-term lenders from 25 to eight, besides cutting interest and finance charges by more than ₹1,200 crore. In an interview, Nayara Energy’s chief executive B. Anand shares his views on the company’s expansion plans. Excerpts:
A lot. Since we took over, the key focus for the management has been to strengthen the financial health of the company and benchmark it against the best in the industry. Over the last two years, we have been able to transform our debt profile, successfully refinancing our debt of more than $5 billion, and reducing our interest and finance charges by more than ₹1,200 crore since FY17. This was possible with a reduction in debt by over ₹4,600 crore and refinancing of high-cost old debt through cheaper debt. Our board has given us guidance to achieve and maintain leverage of 3-3.5x (debt-Ebitda). (Ebitda stands for earnings before interest, tax, depreciation and amortization.) We remain committed to maintaining a sustainable level of leverage and any new capex and investment decisions will be based on maintaining the leverage targets.
What are your plans for Nayara’s growth?
We have acquired a very high-quality asset. For us, the primary responsibility is to sweat the asset well and take it to the next level. In the next phase of expansion, given the land available with us, we see an opportunity to double our refining capacity from the present 20 million tonnes per annum with an integrated petrochemical complex, making it among the world’s largest integrated sites. Also, through our petrochemicals story, we wish to create a big industrial park, so that many downstream opportunities are available for others to participate in and grow.
You have not rebranded the Essar oil fuel retail outlets. Why?
These pumps are known as laal (red) pumps and that is how customers associate with them. Therefore, we have decided to retain that. Retail is a very exciting space for us. Our dealer-owned-dealer-operated formats not only allow us to keep costs low, but also give us a deep retail network. At the end of 2021, we plan to have 7,300 fuel retail outlets, up from the present 5,344. This expansion will also increase our market share from 5% to 7%. The first focus right now, however, is on automation and integration of these assets. We will not go to the whole country, but look at priority markets and develop those. Non-fuel retail is also a very exciting space for us and we are trying to work on it.
After the Iran and Venezuela sanctions has crude oil procurement become tough for Nayara?
When we acquired Essar Oil, the staple diet for our refinery was Iranian crude, at more than 40%. However, Essar Oil had developed the crude market very well and with our refinery situated in the trading hub of India, wherein almost 65% of crude comes through the west coast, securing crude oil supply was not a challenge. This location not only lowers freight costs for us, but also enables us to cater to key markets in Europe, the Middle East and Southeast Asia.
Do Rosneft and Trafigura help you procure crude?
They have their equity barrels across various countries that help us when needed. However, it all works on two premises. One, it has to be at an arms-length basis and, two, it has to make economic sense. For instance, though Rosneft is a parent it does not mean we will process only Russian crude. We will process what is best for the refinery. The availability of crude is not a problem for us. Today, everyone wants to work with us.