Essar Oil in advance negotiations with SBI for Rs 6,300 crore loan

To settle off its Rs 6,300-crore sales tax burden to the Gujarat government, Essar Oil is in advance negotiations with the State Bank of India (SBI) to arrange for a six year loan with an average interest rate of 12.5 per cent. If sanctioned, SBI’s exposure in Essar Oil alone will be close to Rs 9,500 crore.

Essar Oil, 87 per cent owned by London-listed Essar Energy Plc, had deferred $1.24 billion under a tax benefit provided by Gujarat, where its Vadinar refinery is located. In January, India’s top court ruled that Essar oil was not allowed to defer the payment.

As of December 2011, the company’s gross debt (long-term) had gone up 20 per cent to Rs 15,297 crore, against Rs 12,718 crore in December 2010. Its net worth in the same period was down 54 per cent at Rs 2,854 crore, against Rs 6,217 crore a year before.