If talks between Russian state-owned enterprise, PJSC Rosneft Oil Company, and India’s Reliance Industries go through, the latter may well be on its way to become India’s No. 1 oil refiner, overtaking the state-owned Indian Oil Corporation (IOC).
Sources confirm oil giant Rosneft’s top officials have visited India at least thrice in the last one year as they engage in early talks with potential investors, including Reliance Industries, to sell the company’s 49.13 per cent stake in Nayara Energy.
Nayara Energy, previously Essar Oil, operates a 20-million tonnes-a-year oil refinery and 6,750 petrol pumps in India.
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Rosneft had acquired Essar Oil in a USD 12.9-billion deal in 2017, but decided to exit the company in 2024 after being unable to get full financial benefits from its Indian operations, including repatriating earnings, due to international sanctions.
Alongside Rosneft, UCP Investment Group, a major Russian financial firm, is also selling its 24.5 per cent stake in Nayara.
The rest of Nayara’s ownership includes Trafigura Group (24.5 per cent) and a group of retail shareholders. If a deal is struck, Trafigura too may exit the venture within months on same terms, they said.
The stake of Rosneft and UCP was offered to Reliance Industries, Adani Group, Saudi Aramco and state-owned ONGC/IOC combine among others.
But the USD 20-billion valuation that Rosneft had put for Nayara was considered too steep a price by almost every potential investor, including the Adani Group, which is now keen to expand its business in the renewable energy sector.
Having secured a multi-billion-dollar partnership in city gas and renewable energy space with French energy giant TotalEnergies, Adani’s deal with TotalEnergies includes an agreement that limits future investments in fossil fuel space.
The only other serious contender for Nayara’s takeover is Saudi Aramco, the world’s largest oil exporter, which has been nurturing ambitions of having downstream presence in the world’s fastest growing oil market.
Aramco had previously agreed to invest in a giant oil refinery-cum-petrochemical complex that state-owned firms had planned to build in Maharashtra, but that project hasn't taken off due to land acquisition delays.
In 2019, it signed a non-binding agreement to buy a 20 per cent stake in Reliance's oil-to-chemical (O2C) business for USD 15 billion, but the deal was called off two years later over valuation issues.
However, sources say Aramco considers the USD 20 billion valuation in Nayara too high, as do both Oil and Natural Gas Corporation (ONGC) and IOC, for whom the price of refinery should not be over USD 2.5-3 billion.
If Reliance, which operates twin refineries with a combined capacity of 68.2 million tonnes per annum at Jamnagar in Gujarat, can crack the deal with Nayara, it can cross IOC’s 80.8-million tonnes-a-year capacity to become No.1 refiner in the country.
More importantly, the 6,750 petrol pumps of Nayara would help it gain a meaningful share in the fuel retailing business, especially since Reliance has just 1,972 petrol pumps out of 97,366 outlets in the country.
"Oil refining alone is not a profitable business. Unless you have marketing, you can never make money," says an industry official.
But, with Reliance pegging the value of the marketing network at USD 5.5 billion per outlet, the 20-million tonnes Nayara unit and its planned petchem unit could be worth another USD 5 billion.
Sources said since the start of talks, Rosneft has brought down the valuation to USD 17 billion but that too is considered too high by companies such as Reliance.
However, no official deal has been confirmed yet, nor has Rosneft made a formal statement on the matter. A Reliance spokesperson said they did not “comment on media speculation and rumours”, and “will make necessary disclosures in compliance with SEBI Regulations 2015”.
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