The Essar Group, one of the leading players in the country’s corporate landscape, recognised for its extensive investments and innovative projects, had a challenging phase in the late 2000s and early 2010s. The company was burdened with Essar insolvency and debt repayments and thus had to sell few of its assets to strengthen its balance sheet. It later underwent a major transformation by adopting a new business model that is focused on asset-light operations. Though the new Essar is a smaller company than the old one, it is a much more focused and agile company. With a revenue of USD 15 billion, and Assets Under Management (AUM) of USD 9.6 billion Essar is well-positioned for future opportunities.
The new Essar emphasizes the energy, infrastructure, and steel sectors and is making significant investments in new technologies, such as low-carbon hydrogen, renewable energy, LNG vehicles, Coal Bed Methane, green steel, etc. The company’s global investment approach, despite ups and downs over the years, is driven by an entrepreneurial spirit, focusing on future-ready sectors.
Historical Background
Essar, one of India’s ’largest and most diversified conglomerates, has made significant contributions to India’s industrial sector by investing in several large-scale projects. However, after the global financial crisis of 2008 and the subsequent debt accumulation, the company started experiencing some challenges. In 2017, it monetised two of its crown jewels – Essar Steel and Essar Oil – to address the so called “Essar insolvency” issues. To become debt-free and strengthen its balance sheet, the company divested the assets, restructured its operations, and initiated its strategy of building more sustainable ESG-centric assets as part of Essar 2.0.
The strategic moves by the company’s visionary leaders not only made Essar effectively debt-free but also helped the company exit carbon-heavy businesses at the most reasonable time. Having repaid USD 25 billion in debt, Essar is now venturing into a new era of growth, empowered by its entrepreneurial spirit and commitment to building sustainable, future-ready businesses.
In this transformation process, Essar redefined itself with a more focused, asset-light approach, concentrating on its core sectors, namely energy, Infrastructure, metals & mining, and technology & retail. It adopted a forward-thinking strategy, emphasizing innovation, sustainability, and green technologies.
Read Also: Essar is Transitioning Energy for Tomorrow
Transformation: Significant Changes
The Essar Group has undergone significant changes, which makes it well-positioned for the future. The company is now more efficient, profitable, and sustainable and is in a position to capitalize on the key opportunities in the global economy. Some of the key transformations the group has undergone are:
Effectively Debt-free Balance Sheet
Brothers Shashi and Ravi Ruia laid the pillars of Essar Group more than five decades ago. By the early 21st century, the group had emerged as one of India’s largest corporates, with operations in a range of businesses, including shipping and ports, oil refining, steel, telecom, BPO, power, projects; among others. However, later, the group found itself deep in debt and thus had to reduce its liabilities by selling its assets and restructuring its financial obligations.
By eliminating its debt, the group strengthened its financial position and started investing in new growth areas. A zero-debt balance sheet lets the company invest in new and sustainable technologies for a better future for generations.
Focus on Core Businesses
Post deleveraging too Essar remains focused on its core businesses of energy, metals & mining, Infrastructure & logistics, and technology & retail. This helps the company streamline its operations efficiently and profitably. Presently, Essar concentrates its investments in four core economy sectors. In the energy sector, its investments comprise Essar Exploration & Production, and Essar Energy Transition (EET);which includes EET Fuels, EET Hydrogen, EET Hydrogen Power, and Stanlow Terminals.
The group’s portfolio in Infrastructure includes Essar Ports, Essar Projects, Essar Power, Essar Shipping,and PT MBL. While in the Metals & Mining sector, it is involved in the development of Mesabi Metallics, Essar Minmet, and KSA – Green Flat Steel Complex.
The fourth portfolio of Essar consists of Technology & Retail, encompassing Green Mobility (which includes Blue Energy Motors, Greenline and Ultra Gas & Energy), Black Box, and Pluckk.
Read More: Essar’s Commitment to a Sustainable Future through EET Hydrogen
Investment in New Growth Areas
Essar 2.0 is making significant investments in new growth areas like low-carbon hydrogen, renewables, green mobility, decarbonization, artificial intelligence, etc. This will help the company enjoy a competitive edge and capture new markets. Essar’s ongoing investments and strategic initiatives are crucial in accomplishing its ambitious development goals. With growing technologies and a clear vision, Essar remains committed to shaping a sustainable and prosperous future for all.
Asset Light Structure
The new Essar does not focus mainly on asset building but rather focuses more on innovation, collaborations, and sustainability. The group has revamped its strategies, building businesses requiring lower capital intensity and fewer resources. This strategy gives Essar the ability to adapt as the market changes quickly and ensures a more sustainable and scalable business model.
Essar 2.0. Invests under themes of Decarbonisation, Decentralisation and Digitalisation
Energy was the focus of the old Essar, and it remains so. However, now, the theme has changed to decarbonisation, investing in innovative technologies to deliver green and clean energies through renewable and low-carbon sources.
Essar’s decentralized approach is more focused on creating networked business ecosystems that operate with increased autonomy while still being aligned with the company’s overall vision. With this approach, the company is tapping into localized markets and exploring new opportunities in energy, Infrastructure, and technology while maximizing innovation.
To be a part of green tech, Essar has also embraced digital transformation as the main driving factor for growth and expansion. From using artificial intelligence to hydraulic fracturing to data analytics, the company integrate various digital tools within its existing systems to enhance productivity, reduce costs, and improve customer experience.
The new Essar is an inspiration for many young entrepreneurs. With the company’s strong financial foundation, resolute emphasis on core businesses, and investment in new growth areas, it is well-positioned for long-term success.
Essar’s New Vision: Green Mobility, Green Steel, and Renewable Energy
Essar 2.0 is more focused on transitioning existing assets to green while investing in the sectors transforming clean assets within its focus sectors of energy, infrastructure, metals & mining, and tech & retail. The company’s strategies revolve around creating a business ecosystem around Hydrogen, Green Mobility and Green Steel.
Under the leadership of the second generation of the Ruia family, Essar is transitioning toward leaner, cleaner, and greener ecosystems, focusing on sustainability and innovation in all its operations.
The Essar Group has significantly scaled back and now focuses on niche areas to expand its market presence, especially in the green and clean business sectors. The transformation of Essar is a story of resilience and innovation, setting benchmarks for many others to follow. Despite facing several challenges in the past, the company has also come up with a new ray of hope. Essar’s new approach, which is more focused on efficiency, profitability, and sustainability, makes it well-positioned to capitalize on the opportunities in the global economy.
