Ruias invest Rs 1,400 crore in Essar Oil

The promoters of Essar Oil have infused $293.30 million (Rs 1,378 crore) into the company by subscribing to a preferential share issue.

“The promoters have been allotted 92.84 million preferential equity shares of Rs 10 each, fully paid up at a price of Rs 144 per share,” the Ruias-owned company said in a statement on Tuesday.

The latest investment has been made through an overseas company and the new shares account for 7.2% of the enlarged capital base of the company, according to the numbers available on the stock exchanges.

The company’s promoters held around 18% of the total equity at the end of March 2010, according to the latest shareholding information.

Shareholder on Monday have the go-ahead for the company to issue up to $1.7 billion worth of shares to the promoters in an effort to raise equity to fund an ambitious two-stage expansion of Essar’s refinery complex in Vadinar in Gujarat. The refinery is being expanded from 3,00,000 barrels per day to 3,75,000 bpd, with the complexity being increased from 6.1 to 11.8.

The company needs around Rs 7,800 crore for the first stage and had said that around Rs 2,000 crore would come from the promoters and around 4,600 crore of the remaining Rs 5,800 crore from debt.

The promoters have earlier infused around $300 million in the company.

“The two instances of infusion of funds are part of the equity contribution by the promoters to finance Phase I of the ongoing refinery expansion at Essar Oil. With the latest funding, the equity required for the purpose of Phase I refinery expansion has now been fully tied up,” the statement added.

The company has been suffering low refining margins due to its inability to ‘value add’ its products by cracking heavier compounds into more lucrative products.

The upgrade-cum-expansion is expected to help it compete better with global players, but the company has faced difficulty raising more debt on its balance-sheet. It already has close to $3 billion (Rs 14,000 crore) of debt.

As expected, interest costs of Rs 1,179 crore dampened its full year profits, reducing net earnings during the year to just Rs 29 crore on a turnover of Rs 42,407 crore. However, excluding interest and tax, profits more than doubled — from Rs 547 crore to Rs 1,208 crore — as company was able to curtail expenses.