The slicing of Essar Oil Ltd (EOL) from the $27 billion Essar Group, which has businesses interests ranging from steel, infrastructure, shipping and retail to technology and outsourcing, could see its turnover fall 45% this fiscal and a drop by a few steps on the corporate ladder.
This is what emerges from Essar Capital director Prashant Ruia's revelation on Monday.
At a press conference for the announcement of the completion of sale of 98% stake of EOL to Russia's Rosneft PJSC and a consortium consisting of Trafigura and United Capital Partners, Ruia said the Indian conglomerate would report a revenue of $15 billion in fiscal 2018, down from the current $27 billion.
That's a slide of 45% in just a single fiscal. EOL contributes a major chunk of Essar's revenue even though its gross debt is lower than Essar steel, whose turnover is second highest in the group.
After these two Essar companies, Essar Ports is a distant third in terms of revenue generation. The group does not see companies like Essar Shipping chipping in a major way to its total revenues.
In fiscal 2017, as per data culled out from the BSE website, Essar Shipping earned a revenue of Rs 664 crore. In the June quarter of the current fiscal, its revenue slipped to Rs 169 crore from Rs175.38 crore in the same quarter last year.
In its bid to pare down debts to deleverage its balance-sheet, the Essar Group has also struck a deal with the Singapore-based private equity Capital Square Partners to sell its business process outsourcing unit Aegis reportedly at a price $300 million.
All this could see the empire of Mumbai-based conglomerate transforming in a big way.
Arun K Singhal, chief editor of DEW Oil and Gas journal, published from Dehradun, believes monetization through sale of its cash-guzzling firms will offer a "breather" to debt-ridden Essar and help it concentrate on its core businesses and scale up faster.
"They (Essar) are paring their debts by almost $11 billion, so almost half of it (debt) is gone. So, I think it must be a good breather for it. It will help them focus on other portfolio (businesses) and grow more on that front. Their original expertise happens to be businesses that they are retaining, as of now," he said.
According to him, refinery was never one of Essar's core businesses; "Besides, they still hold some stake in EOL. So, while they still have a foot in this business (oil), they could reduce their debt and lay more emphasis on other portfolios".
Even Ruia, while addressing the media on Monday, said the closure of Rosneft-EOL deal would give Essar "the necessary bandwidth" that will allow their businesses to "grow in scale and become more competitive".
"We continue to have a significant portfolio of business that will keep us in the league of large conglomerates. Our revenues, even without Essar, will be in excess of $15 billion including operational facilities in sectors such as minerals and metals, energy, infrastructure and services," he said.
Ruia said that over the last six years, the group had completed capital expenditure programme of about Rs 1.2 lakh crore across its entire portfolio of businesses.
He said that with the right size of the balance sheet and "strategic portfolio", all Essar's companies had "significant growth prospect".
"Our asset are newly built and have been built at a low cost and high degree of integration," he said.
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