Es­sar as­set sale may get lower val­u­a­tions

■ Deals for Aegis, Es­sar Ports yet to ma­te­ri­alise

The Financial Express - - FRONT PAGE - De­bor­shi Chaki

THE Es­sar Group may be forced to sell some of its prized as­sets at val­u­a­tions lower than pre­vi­ously sought, re­ports De­bor­shi Chaki in Mum­bai. While the group is cur­rently in talks with po­ten­tial in­vestors to sell part of the pro­mot­ers’ stake in Es­sar Steel, sources say it is also ex­plor­ing op­tions to raise ad­di­tional funds by di­lut­ing stakes in other group com­pa­nies, in­clud­ing BPO arm Aegis and Es­sar Ports, part of its in­fra­struc­ture busi­ness.

TO pare its debt of over R60,000 crore, Es­sar Group may be forced to sell some of its prized as­sets at val­u­a­tions lower than pre­vi­ously sought. While the group is cur­rently in talks with po­ten­tial in­vestors to sell part of the pro­mot­ers' stake in Es­sar Steel, which has a to­tal debt out­stand­ing of over R40,000 crore, sources say that it is also ex­plor­ing op­tions to raise ad­di­tional funds by di­lut­ing stake in other group com­pa­nies, which in­clude its BPO arm Aegis and Es­sar Ports part of its in­fra­struc­ture busi­ness.

While both Aegis and Es­sar Ports have been on the block for a while now, sources say that a deal is yet to ma­te­ri­alise due to dif­fer­ences over val­u­a­tion. While Aegis's US op­er­a­tions were sold for $610 mil­lion in 2014, the group was also look­ing for a buyer for the re­main­ing op­er­a­tions across In­dia, Sri Lanka, Malaysia, Aus­tralia, South Africa, Peru, Ar­gentina, Saudi Ara­bia and the UK but could not strike a deal be­cause Aegis's prof­its had dipped sig­nif­i­cantly af­ter sale of the US arm.

With Aegis again tur ning marginally prof­itable re­cently, sources say that Es­sar Group has once again be­gun look­ing for a buyer. How­ever, when con­tacted an Es­sar spokesper­son de­nied any plans of ei­ther a stake sale or com­pletely ex­it­ing Aegis. "Aegis is hir­ing more em­ploy­ees to ex­pand its op­er­a­tions and there are no plans to sell any stake in the com­pany,” the spokesper­son added.

In­dus­try sources, how­ever, main­tain that surge in hir­ing and ex­pan­sion is pos­si­bly a pre­cur­sor to an im­mi­nent sale with an eye on ex­pected val­u­a­tion. Sim­i­larly, sources added that Es­sar was in talks with Adani group some­time back to sell part stake in Es­sar Ports but there too talks did not fruc­tify over a val­u­a­tion mis­match.

A se­nior Es­sar group em­ployee, who did not wish to be iden­ti­fied, told FE that the group is look­ing at op­tions to sell part of Es­sar Ports stake to in­vestors in Es­sar Steel and Es­sar Oil since the port as­sets are largely cap­tive units mainly ca­ter­ing to these two com­pa­nies.

Es­sar Steel needs to pay lenders close to R3,000 crore im­me­di­ately to keep out­stand­ing loans to the tune of

R25,000 crore (loans of R15,000 crore have al­ready been re­struc­tured) from turn­ing into NPA.

Es­sar Steel is not alone in sell­ing as­sets to re­tire debt. Many In­dian com­pa­nies, in­clud­ing the Jaypee group, Re­liance In­fra­struc­ture and the Avan­tha group, have sold as­sets or are in the process of sell­ing them in the cur­rent fis­cal year. The debt of these com­pa­nies has bal­looned as they went on an ex­pan­sion spree in the last few years. With de­mand not pick­ing up, these com­pa­nies were un­able to re­pay loans.

Es­sar Steel has also availed of the Re­serve Bank of In­dia’s 5/25 scheme un­der which the banks ex­tended its loans by an­other 25 years with an op­tion of re­fi­nanc­ing ev­ery five years.

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