A new energy is driving the Essar Group, which has seen a resurrection after being taken to the brink of bankruptcy. Thanks to the bitter lessons learnt from the past, Essar 2.0 is very different, even though the core focus remains the same.

What’s Different
The business approach has changed in several ways.

One, no relying on debt now. This is understandable because it was overleveraging that brought down the group. It plans to execute and implement projects through partnerships, and raise funds through debt securities.

Two, it is looking at an asset light model. The Essar group of the past was asset heavy with total ownership of all the infrastructure in its portfolio. It still has assets, but it is executing them with partners. What Essar brings to the table in many of its projects is its expertise, skills, and experience in the sectors, says a company insider. As an example of the above two, in February the group announced a $3.6 billion investment by Essar Energy Transition in low carbon energy transition projects. This investment will be done over a period of five years and more importantly, it will take on a partner who will provide a considerable portion of the equity.

Three, the owners — the Ruia family with Prashant Ruia in the driver’s seat — prefer to think of themselves as investors rather than promoters. The change in mindset is expected to result in a focus on returns and on shareholder interest. This is a major departure from the self-centric ‘ Lala’ mindset of the past that family-owned businesses typically display.

Four, risk mitigation has become a key strategy for the company, and it has also appointed a Chief Risk Officer. The company has de-risked its operations by spreading them across India, the UK, the US, Vietnam, and Saudi Arabia. In fact it is focusing more on England than on its home turf. Of the $3.6 billion proposed investment, two-thirds are earmarked for the UK.

Energy remains the core
Energy was the focus of the old Essar, and it remains so. “We’ve been involved in the energy sector for the last 30 years… the idea is to remain focused on energy,” says Prashant Ruia.

The difference is in the technologies. Its earlier focus on energy was through refineries, exploration, production, downstream and retail in effect the entire value chain.

The theme has changed to decarbonisation, investing in innovative technologies to deliver green and clean energies through renewable sources. “The idea is to remain focused on the value chain but with future technologies,” says Ruia.

The group is therefore undertaking a blue hydrogen project in the UK, through its joint venture Vertex, developing a green ammonia import terminal in the UK and checking the feasibility of a green ammonia project in India too.

Along with energy, it will continue to play in infrastructure and logistics, metals and mining, technology and retail. But again the focus will be on decarbonisation, decentralisation, and digitisation to be more in sync with the current discourse of sustainability.