Rosneft-backed Nayara Energy put under credit watch: CARE Ratings

CARE Ratings said on Monday that Russian oil company Rosneft-backed Naira Energy has been placed on “credit watch with negative implications” because of sanctions against Moscow for its invasion of Ukraine. Naira, which is 49.13 percent owned by Rosneft, operates a 20 million tonne per annum oil refinery at Vadinar in Gujarat and a growing network of petrol pumps.

CARE Ratings said in a statement that it has placed long-term bank loans of Rs 17,149.5 crore and non-convertible debentures of Rs 2,541.84 crore of the company under credit monitoring with negative implications.

“Care Ratings has placed Naira’s long-term rating on ‘Credit Watch with Negative Implications’ due to the Russian invasion of Ukraine and economic sanctions being imposed on Russia and certain Russian entities and individuals,” the statement said.

The rating agency said it will continue to monitor the situation and take rating action in case of any adverse impact of the war on Naira shareholders and the company.

However, it said the company does not have any major operational dependence on Russia or any Russian entity.

Rosneft Singapore Pte Ltd, a subsidiary of Rosneft Oil Company, and Kesani Enterprises Co Ltd, a consortium of Trafigura and United Capital Partners (UCP) investment group, hold 49.13 per cent stake in Naira.

“Notably, Rosneft, the major shareholder of Naira, is already subject to regional sanctions since Naira became a shareholder and no new sanctions have been announced on Rosneft. At present, none of the recently announced sanctions There is no impact on Naira’s operations,” CARE Ratings said.

In addition, Naira has no major operational dependence on Russia or Russian entities, including Rosneft, as it sources crude oil from countries such as Iraq, Egypt, countries in the Middle East and Latin America, while being among major export destinations. The Netherlands is included. and the Far East.

“Nevertheless, given the gravity of the war situation and the resulting global response to sanctions on Russia and certain Russian entities, there is great uncertainty over the exact effects of the situation on Naira shareholders,” the statement said.

While timely completion of petrochemicals project within projected cost and refinery operating at healthy throughput are positive factors that could lead to rating upgrade, any adverse impact of geopolitical situation on the operations of the company or its shareholders and capital structure A fall in the amount, as a result of the firm incurring capital expenditure through higher borrowings, will be downgraded.

“However, the strength of the rating is affected by the exposure to volatility in crack spreads, modest debt metrics, competitive industry landscape as well as the government regulation risks inherent in the Indian oil and gas sector, associated with performance and stabilization. With regard to the ongoing petrochemicals project,” the statement said.

Going forward, CARE Ratings expects the company to report an improvement in debt metrics on the back of a reduction in debt, supported by healthy prospects and recent fund infusions, even as fresh debt for the petrochemicals project 6,539 with a total project cost of Rs. crore, to be funded through loans of Rs 4,016 crore and the remaining from internal accruals and fund infusion.

The project is expected to be commissioned by August 2023.

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