Oct. 8 (Bloomberg) -- Essar Group, which runs India’s second-largest private refiner, may sell stakes in its oil and shipping units as part of a global expansion plan, said Prashant Ruia, the group’s chief executive officer.

“There is enough headroom in these two companies so over the next couple of years we will consider increasing the free float,” Ruia, 40, said in an interview in Mumbai.

Refiners, steelmakers and telecom operators are expanding as national stimulus packages help lift the global economy out of the deepest recession since World War II. Essar is buying oil refineries, steel plants, and coal and iron ore mines from Australia to Canada to compete with rivals including Reliance Industries Ltd. and ArcelorMittal.

The company yesterday outbid Jindal Steel & Power Ltd. for the Australian coal explorer Rocklands Richfield Ltd., upping its offer price by 19 percent to A$144 million ($128 million), Sydney-based Rocklands said in a statement.

To fund its plans, Essar Group may do something it hasn’t done since 1995, said Ruia, who has worked for more than two decades in the business started by his father, Shashi, and uncle Ravi. The brothers, whose first initials form the name, started the company in 1969.

‘Cash-Rich’

“We would like to go to the market to raise funds when the time is right,” he said, adding that the details haven’t been worked out. “First there will be some activities in the companies that are already listed.” There are no plans to sell shares in the holding company, he said.

Niraj Shah, an analyst with Centrum Broking Pvt. in Mumbai, said Essar was “cash rich” because of its steel and telecommunications businesses, giving it the confidence to look abroad for bargains.

“Assets are available at reasonable prices so it’s a good time to buy,” Shah said. “The acid test is how they finance and run and integrate the global assets into the group.”

Essar Oil Ltd., which is almost 89 percent-held by the group, operates a refinery in the western state of Gujarat that processes 10.5 million tons a year. It plans to spend $1.56 billion expanding it to 16 million tons by December next year, according to its Web site.

Shares Rise

The Mumbai-based company then will spend another $4.44 billion to increase capacity to 34 million tons, Ruia said.

“They are expanding capacities in India and need to find markets overseas,” said Niraj Mansingka, an analyst with Edelweiss Capital Ltd. in Mumbai, who has a “buy” rating on the stock. “This is a good time to expand considering costs of assets are comparatively low.”

The refiner’s shares have climbed 71 percent this year, tracking a 74 percent gain in the key Sensitive Index of the Bombay Stock Exchange. The shares rose 0.1 percent to 148.90 rupees at close of trade today in Mumbai. Essar Shipping Port & Logistics Ltd., 83.7 percent owned by the group, rose 3.9 percent to 68.75 rupees. The shares have risen more than 90 percent this year.

To establish a global footprint, Essar Oil bought a 50 percent stake in Kenya Petroleum Refineries Ltd. in July. It also bid for Royal Dutch Shell Plc’s Stanlow plant in England to add capacity in Europe and gain access to markets and pipelines, a person familiar with the matter said Aug. 17, declining to be identified because the information is confidential. Ruia declined to comment on the report.

Essar Oil is seeking coal-bed methane exploration assets overseas and is studying exploration opportunities in China, India and Indonesia, Chief Executive Officer Shishir Agarwal said Oct. 1. The company may spend $300 million to produce natural gas from a coal seam block in the east India state of West Bengal that is expected to start production in December.

Africa Expansion

“Raising finances is not a problem if the fundamentals of the projects are strong,” Ruia said.

The group plans to raise as much as $1 billion in a bond sale that began Oct. 5 and is scheduled to end Oct. 21.

Essar Group, which has annual revenue of $15 billion, runs telecom, energy, power, real estate and steel businesses. The group, which sold a controlling stake in Hutchison Essar Ltd. to U.K.’s Vodafone group in 2007 for $11.1 billion, is also expanding its telecom business in Uganda and Kenya.

Essar also is adding steel capacity as it expects demand in India to grow between 8 percent and 10 percent, Ruia said.

India’s steelmakers are expanding as the government spends $500 billion to build roads, ports and power plants by 2012.

The Mumbai-based company plans to raise annual output to 15 million metric tons during the next year, he said. It will more than double domestic capacity from 4.6 million tons to 10 million tons and will increase output at its Canadian unit to 4 million tons a year.

Yet the global recession forced the company to delay building a plant in the U.S. state of Minnesota.

“Things are better in the region now but we are still not out of the woods,” Ruia said. “At least there is a floor now.”

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net.

Last Updated: October 8, 2009 07:30 EDT