ICICI Surges Most Since March on Essar Debt-Recovery Hopes

  • Refinery sale will help to repay $5 billion of debt, Ruia says
  • ‘Significant step’ in deleveraging of Indian corporates: ICICI

ICICI Bank Ltd., India’s largest private-sector bank, rose the most in seven months in Mumbai trading on optimism the lender will recover some of its loans to the Essar Group.

Shares of the bank rose 7 percent to 258.75 rupees, while the locally listed stock of Standard Chartered Plc, also owed money by Essar, gained 1.6 percent. ICICI was the best performer on the benchmark S&P BSE Sensex index, which fell 0.5 percent.

Prospects for loan recoveries rose after Essar Group agreed to sell its refinery unit to Rosneft PJSC, Russia’s biggest listed oil producer, and a consortium of Trafigura and United Capital Partners for about $13 billion. The all-cash deal will help Essar, which also runs steel mills and ports, cut its debt by more than 50 percent, Prashant Ruia, a director at the group said in an interview on Sunday.

The transaction will help Essar repay $5 billion to the lenders to its holding company, Ruia said. ICICI, Standard Chartered and Axis Bank Ltd. are the banks with the largest exposure to Essar’s holding company, according to Rethish Varma, head of research at Aditya Trading Solutions Ltd.

Significant Step

“It will take at least six months before Essar can get all regulatory approvals for the deal to bring in the money,” Bengaluru-based Varma said by phone. “ICICI, Axis and Standard Chartered will be first to get repaid.”

ICICI has been closely working with various companies including the Essar Group to help them deleverage their stressed balance sheets, Chanda Kochhar, the bank’s chief executive officer, said in an e-mail after the deal was announced.

Essar’s refinery sale is “a significant step in the process of deleveraging the balance sheets of Indian corporates,” Kochhar said.

Mumbai-based spokesmen for Standard Chartered and Axis Bank declined to comment on the deal.

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