Essar Group Charts Out Investment-Led Growth Plan On Strength Of Lighter Balance Sheet

The $10 billion Essar Group is looking to embark on a new phase of investment-led growth, banking on the strength of a substantially lighter balance sheet, promoters Ruia family has said.

The energy-to-technology conglomerate has repaid loans worth Rs 1.4 lakh crore in the past three years, the Ruias said, adding that the group's cash flow remains strong despite losing Essar Steel Ltd. to ArcelorMittal SA by way of insolvency proceedings.

Essar Group has Rs 1 lakh of revenue from existing businesses, the family has claimed.

The group has kickstarted its 50th-anniversary celebrations with aggressive influencer outreach.

In a mail sent to union ministers, chief ministers and top bureaucrats, Essar Group has indicated that it is "poised to embark on a new phase of growth while driving growth in its existing portfolio". The company did not specify what the new growth areas could be, but said it is "armed with a substantially lighter balance sheet" after it took "a conscious call of reducing its debt in response to evolving domestic and evolving economic scenario".

The letter was jointly signed by Ravi Ruia and Prashant Ruia.

"In the largest debt reduction exercise in the history of Corporate India, we have paid about Rs 140,000 crore ($20 billion) of debt to the banking system over the last three years," the Ruias wrote in the letter. "Our strong portfolio of companies consistently generates healthy and sustainable earnings and have combined revenue of about Rs 1,00,000 crore ($14 billion)."

The group claimed that its ambition to create world-class businesses has not been thwarted by business and regulatory challenges in the mainstream steel and power business.

Essar Group, the promoters said, had played a vital role in the country's development, with capital investments of over Rs 2 lakh crore in vital sectors of ports, steel plants, oil refining and fuel retail, oil and gas exploration and production, power generation and transmission, mining, shipping and telecom, with substantial equity contribution.

"We have built some of the finest assets in these sectors, creating thousands of jobs, and contributing several thousand crores of rupees to the Indian exchequer by way of taxes and royalties,” the letter read. "A few years ago, we took a conscious call of reducing debt in response to the evolving global and domestic economic scenario."

Reminiscing 50 years of Essar, the Ruias said the group had to face several business and regulatory challenges along the way in its flagship steel and power businesses, "which particularly impacted us".

"Committed gas supply contracts for the Essar Steel Complex were withdrawn in 2012 and allotted coal mines for power plants were cancelled in 2014, leading to a partial closure of some of our prime operating assets," they said. "We have dealt decisively and proactively with these challenges and decided that it would be prudent to drastically reduce our borrowings."

These challenges did not stop Essar from creating world-class assets. "The greenfield assets built by Essar have attracted significant foreign direct investment of $40 billion, which is reflective of the superior and world-class quality of its assets," the letter read.

The deal to sell Essar Oil to Russia's Rosneft OAO alone saw over Rs 86,000 crore ($13 billion) of FDI, the country's largest till date, it claimed.

The Essar Group currently owns businesses in the core sectors of energy, metals and mining, infrastructure, services and technology.

• In the energy sector, Essar Group has commercial interests in oil, gas and coal bed methane exploration and production in India, Vietnam and Nigeria; oil refining and retailing in UK and power generation in India and Canada.
• In infrastructure, Essar Group operates ports and terminals in India, U.K. and Africa, and has commercial interests in turnkey project construction in India and the Middle East.
• In the metals and mining sectors, Essar Group has exposure to iron ore mining and pelletisation and coal mining in the U.S. and Indonesia.
• In new-age services, Essar Group has business interests in digital solutions and customer experience platforms in India, Europe, and the U.S.

"We have fulfilled our Corporate Social Responsibility with focused community uplift programmes in the areas of livelihoods and entrepreneurship, women empowerment, health, education, infrastructure and environment. Positive impact of these initiatives makes a difference in the lives of 500,000 people from 500 villages across eight Indian states," the letter added.