UPDATE 3-India's Essar to raise $2.5 bln in London energy IPO

Thu Apr 8, 2010 6:57am EDT

* Co plans to file papers with regulators next week-sources

* Plans to sell 20-25 pct in energy and power business

* Shares to be listed on London Stock Exchange

* Share sale is third-largest by an Indian firm (Adds link to FACTBOX; quotes, background in paras 8-12)

By Pratish Narayanan and Sumeet Chatterjee

MUMBAI, April 8 (Reuters) - Indian conglomerate Essar Group said it plans to raise about $2.5 billion by listing its energy and power businesses on the London bourse, tapping new investors to fund its ambitious expansion plans.

Essar, controlled by billionaire brothers Shashi and Ravi Ruia, plans to sell a 20-25 percent stake in Essar Energy and will use the proceeds to fund projects including the acquisition of coal mines and the development and exploration of oil and gas blocks, the company said in a statement.

The sale marks yet another instance of Indian firms looking to expand operations and gain a foothold overseas as they seek new avenues for growth.

"Listing abroad ensures that the company gets much more visibility and much more participation," said Ambareesh Baliga, vice president at Karvy Stock Broking.

"For Indian companies, they cannot become globally recognised if they concentrate only on India."

The Ruia brothers founded Essar in 1969 following the death of their father and business mentor. Since winning a contract to build a breakwater at the Chennai port in southern India, they have rapidly expanded the group to include shipping, steel, refining, power and telecoms. The brothers are now worth a combined $13 billion, according to Forbes. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a FACTBOX on Essar Group, see [ID:nSGE6370BT] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

LISTING BY MAY

Essar will file papers for the initial public offering next week, two sources with direct knowledge of the matter said. Roadshows would start within two weeks and a listing was expected in late April or early May, said another source. The sources did not want to be identified as they were not authorised to talk to media.

The share sale would be the third-biggest by an Indian firm, behind Reliance Power's (RPOL.BO) $2.9 billion IPO in 2008 and private-sector lender ICICI Bank's (ICBK.BO) $4.6 billion follow-on sale in the United States in 2007.

"It is clear that the group requires money, be it for expanding its refining capacity or developing power plants," Deven Choksey, chief executive of K.R. Choksey Shares and Securities, said.

"There are definitely more investors willing to buy into holding companies such as Essar in London than here in India."

After the offering, Essar Energy will be listed on the London Stock Exchange and will be considered for inclusion in the FTSE 100 index .FTSE, the company said.

The group's energy and power operations, including four existing power plants with a total installed capacity of 1,220 megawatts, are valued at about $12 billion, a source had told Reuters previously.

J.P. Morgan Cazenove (JPM.N) is the sole financial adviser for the offer, while it and Deutsche Bank (DBKGn.DE) are joint bookrunners.

"Now is the right time to open the business up to global capital, to fuel our future growth ambitions, and to address India's significant energy deficit," said Prashant Ruia, chief executive of Essar Group and Shashi's son.

Ravi Ruia, the vice chairman of the group, will move to London to spearhead the global business of the group, two sources with direct knowledge of the matter told Reuters earlier this month. [ID:nSGE6300DH]

STRING OF DEALS

Essar Group has embarked on a string of deals recently, buying U.S. coal producer Trinity Coal Partners LLC for $600 million, and the Aries coal mines in Indonesia for about $175-$200 million as it seeks to source raw materials for its global steel and power operations.

Essar Oil (ESRO.BO), a group firm, is in talks with Royal Dutch Shell (RDSa.L) to buy three European refineries. [ID:nBMA007305]

In February, Essar sold its tower unit to telecoms tower firm American Tower Corp (AMT.N) for about $432 million, while in November, it agreed to buy a majority stake in Dhabi Group's telecommunication businesses in Uganda and Congo. [ID:nSGE61O01W]

Essar is Vodafone's (VOD.L) partner in India's No. 3 mobile firm, Vodafone Essar.

Other big recent deals involving Indian firms include Reliance Industries (RELI.BO) seeking a joint venture with Atlas Energy ATLS.O to develop the U.S. firm's Marcellus Shale gas operations, according to source, while No. 1 telecoms firm Bharti Airtel (BRTI.BO) last month clinched a deal to buy most of the African operations of Kuwait's Zain (ZAIN.KW) for $9 billion. [ID:nSGE62F0EN] [ID:nSGE62T0J9] (Editing by Ranjit Gangadharan and Lincoln Feast)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.