Nayara Energy to enter petchem, expand fuel outlets

Mumbai: Russian oil major Rosneft-backed refinery Nayara Energy said on Tuesday it will be investing $850 million to expand into petrochemicals, even as it is expanding its fuel retail network.

After the Russian company acquired Essar Oil's assets, including its fuel retail outlets, about two years back, Nayara is making ambitious plans to increase its fuel retails to over 7,000 by 2020.

Nayara is also planning expand its petrochemicals business by setting up a 4,50,000 tonnes a year polypropylene plant, the company said in a statement.

The company has licensed technology from WR Grace & Co to produce a broad range of phthalate-free products from its 4,00,000 barrel per day refinery in Gujarat.

In case of the retail outlets, the company has retained the Essar's brand name. As Nayara uses franchisee-owned, franchisee-operated model, whereby the franchisee leases land to the company for a period of 30 years and thereafter invests in setting up the infrastructure for the outlet, the company does not have to invest in setting up these outlets. The cost of constructing a retail outlet is Rs 70 lakh-Rs 1 crore. The company currently has over 5,000 outlets.

With the expansion plans, Nayara will remain the largest private fuel retailer in the country. Other private players like Reliance Industries and Shell trail Nayara by a huge margin. While Reliance has over 1,300 fuel retail outlets, Shell operates about 120 fuel retail stations. Shell, which is an expansion mode, has acquired land for another 150 stations, which are under-construction and is also planning to open 1,200 retail stations across India over next 10 years.

Nayara Energy has recently raised $750 million through an offshore loan aimed at reducing the company's cost of debt and strengthening its balance sheet.