LIC wants Essar to clear all dues to give NOC to its deal with Rosneft

India's top financial institution, Life Insurance Corporation (LIC), has said it won’t give green signal to the $13-billion Essar-Rosneft deal unless Essar clears all dues from its end.

This deal is going to be the $4 in India.

“The agreement of the loan that $4 had given to Essar Oil requires its consent for change of management,” an LIC spokesman told ET. "We had received proposal from group companies for flexible restructuring and it was decided before considering (the) proposal... the company has to clear all the dues (sic)," the official added.

The loan outstanding to Essar Oil is worth $125 million, while its exposure to Essar Power is around Rs 1,500 crore.

Also read: $4

Now that LIC has taken a stand, it remains to be seen whether the all-cash transaction gets all the necessary approvals before the end of this fiscal.

Industry experts are of the view that the reason behind LIC's unusually tough attitude could be that once the deal with Rosneft goes through, it could be difficult to recover the loan amount.

Also read: $4

"$4 is keen to enter India and Essar is the only available avenue. Paying off $125 million to LIC and another $44 million to some of the government-owned general insurance companies is not exactly a big deal. But LIC would be a loser if only the Essar Oil loan is paid back...the company is making money and may have a ratings upgrade once the deal closes. That would be losing a good asset," a senior banker familiar with the negotiations told ET.

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