MOSCOW (MRC) -- Indian refiner Nayara Energy, part-owned by Russian oil giant Rosneft, could find it harder to raise funds for expansion as a result of Western sanctions in response to Russia's invasion of Ukraine, sources with direct knowledge of the matter said, said Hydrocarbonprocessing.
"We are cautious even if there is limited exposure and in this case they have a majority Russian exposure via Rosneft and a Cyprus based fund, so it makes sense to put these loan disbursals on hold and to play safe," one banking source said. Nayara said in response to questions about its funding plans that it did not have any direct dependence on banks for the expansion of its retail network as the majority of its outlets are owned and operated by dealers.
"Some banks do provide working capital financing facilities to some of our dealers, which is governed by the bi-lateral agreement between the bank and the franchisee, without any recourse to Nayara," it said in a statement on Thursday. Nayara is in the process of rebranding its fleet of more than 6,000 retail fuel stations in its own name from Essar Oil as it was formerly known, and plans another 3,000 outlets.
Dealers who want to set up Nayara's fuel stations and those rebranding their facilities, are facing difficulty in getting funds from banks, the sources said. Rosneft owns a 49.13% stake in Nayara, which was formerly known as Essar Oil, while a similar-sized holding is split between global commodities trading house Trafigura and Cyprus-based Russian investment group United Capital Partners.
Indian banks are awaiting clarity from Prime Minister Narendra Modi's government and the central bank on assets and payment settlements relating to Russia, which has meant putting loans to businesses related to Nayara on hold, the sources said. Nayara operates the 400,000 bpd Vadinar refinery in India's western Gujarat state and has plans to raise its petrochemical capacity in phases.
Last year, Nayara raised 40 B rupees (USD528 MM) for its planned USD850 MM polypropylene plant, which is to be funded through a mix of debt and equity. The sources, who spoke on condition of anonymity, said it could be difficulty for Nayara to raise funds in the next round for expansion if sanctions against Russia continue.
We remind, in December 2021, Rosneft backed Nayara Energy, earlier known as Essar Oil, has chalked out massive expansion plans for India which include setting up of a greenfield petrochemical complex and ramping up its existing refining capacity from 20 million tonnes per annum (mtpa) to 46 mtpa at Vadinar near Jamnagar in Gujarat. The total envisaged investment for expansion, of which a major part is towards building a new petrochemical complex, is about Rs.1.5 lakh crore, they said. The expansion plans also include increasing its retail presence and additional investment at the captive port of Vadinar.
As per MRC, Nayara Energy hopes to operate its 400,000 barrels per day (bpd) refinery in western India at close to 100% capacity in 2021 as fuel demand is picking up, according to Hydrocarbonprocessing with reference to Chief Executive Alois Virag's statement at APPEC 2021 conference. Nayara, part owned by Russian oil major Rosneft, cut rates at its Vadinar refinery in Gujarat state last year.