Essar Oil plans to to replace its rupee borrowings with dollar borrowings in order to reduce interest cost and extend the maturity period of its debt.
The reduction in interest cost is expected to boost returns from the refinery business of the firm. The company increased borrowing to finance its refinery expansion project, which was completed in March 2012.
It raised its refinery capacity to 20 million tonne per annum and complexity to 11.8 last year.
The company’s earnings are in dollars and hence its borrowings should also be in dollars, which is not the case now, reports indicate.
Meanwhile, the company aim to keep its Vadinary refinery operational beyond 100 percent capacity and clock gross refining margins (GRMs) of IEA$7/8 per barrel. IEA is the GRM benchmark used by UK-based oil refineries.
Also, the company expects to ramp up its retail sales of petroleum products following the partial de-regulation of diesel. The firm currently has 1,400 outlets and another 200 are coming up. It wants to increase the sales from these outlets to 200 kilolitre per day, which it achieved when the prices were similar to the PSUs.
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