Essar Oil Looks to Dollarise Debt, Shares Gain

Essar Oil shares gained over 3 per cent to a day high of Rs 111 on Friday after the company said it will convert over $1 billion dollar worth of rupee loan to dollar debt by March to reduce its cost of borrowing. As of September 30, 2014, Essar Oil had a debt of around Rs 22,000 crore on its book.

The company has been trying to dollarize its debt in order to de-risk its business from currency fluctuation and reduce the cost of its debt. Essar Oil has a global exploration capacity of about 7 lakh barrels per stream day (bpsd), due to which most of its revenues come in dollar. So, converting debt to dollar will reduce significant currency risk for the company, analysts say.

Essar Oil has already dollarised about $1 billion of rupee debt, which besides lowering their interest cost has also extended the debt tenure, said Prashant S Ruia, chairman at Essar Oil told investors in the company's AGM. (Read full story here)

Essar Oil, a part of the Essar Group that is controlled by billionaire brothers Shashi and Ravi Ruia, will buy additional 73.99 per cent stake in group company Vadinar Power Company to make it a fully owned subsidiary. The acquisition was approved by board and shareholders in May.

Shares in Essar Oil ended 0.89 per cent higher at Rs 108 apiece, outperforming the broader Nifty, which ended 0.33 per cent higher on Friday.

(With inputs from PTI)