Within a week of losing American steel firm Esmark to Russian metals giant Severestal, one more overseas acquisition has gone bad for the Ruias of Essar.
The Kenyan government has dumped the Mumbai-based group in favour of a Libyan company for a 50 per cent stake in a refinery project in Mombasa.
Essar officials said they are still negotiating with the Kenyan government so that they can invest in the project.
"We have not yet received any official communication from the Kenyan government on this. We are still in the race," an Essar official reiterated.
Informed sources told Business Standard that after the acquisition, the Libyan company, Tamoil, will decide whether Essar should be given a part of the stake or not.
In January this year, Essar Energy Overseas Ltd, a subsidiary of Essar Oil, had signed a memorandum of understanding with the Kenyan government to pick up 50 per cent in Kenya Petroleum Refineries Ltd from Shell, Chevron and BP Africa Ltd. The Kenyan government held the rest of the stake and the crucial right of first refusal.
Essar had planned to invest $450 million in the Kenyan refinery -- its first refinery investment outside India -- excluding an undisclosed acquisition cost. The acquisition was to take the Essar group closer to its goal of refining one million barrels of crude oil per day.
Industry insiders said hectic lobbying by Tamoil made the Kenyan government take a decision in favour of the Libyan firm. According to the arrangement put in place by the Kenyan government, Essar could be accommodated in the refinery business by offering some shares only after the Libyans close the deal.
So, said the sources, Essar will now be at the mercy of Tamoil for a stake in the refinery.
Earlier in June, Essar officials had said the company might end up getting a 25 per cent stake in the refinery.
The share of Essar Oil fell 11.11 per cent to Rs 176.80 on Monday on the Bombay Stock Exchange. In the last one month, Essar Oil has crashed 21 per cent in the sagging Indian stock markets. The refinery in Changamwe, Mombasa, has a capacity to process about 72,000 barrels of crude oil per day.
The intended modernisation programme is aimed at raising the production of liquefied petroleum gas from 30,000 tonnes to 120,000 tonnes per year.