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Essar Oil's shareholders have accepted the proposal to acquire a group company and making investments in another at its extraordinary general meeting on Tuesday, the company informed the bourses .

Essar Oil, a part of the Essar Group that is controlled by billionaire brothers Shashi and Ravi Ruia, will buy additional 73.99 Percent stake in group company Vadinar Power Company to make it a fully owned subsidiary. Essar Oil will acquire 73.99 Percent equity shares and all the compulsorily convertible preference shares of Vadinar Power Company from Essar Power for around INR  2,100 crore. Essar Oil's proposal to acquire INR 10.25 Percent of cumulative redeemable preference shares (CRPS) of Essar Power from Essar House for up to INR 1,025 crore also got a nod from shareholders.

Earlier Mumbai-based proxy advisory firm, Stakeholders Empowerment Services, had asked shareholders of Essar Oil to reject the proposals of acquiring a group company and making investments in another. It has questioned the proposal to acquire full control of Vadinar Power Company, but Essar Oil says the move would optimise cost and operations in compliance with regulations. Essar Oil said it had transferred 74 Percent stake to Essar Power in 2003 as it was undergoing corporate debt restructuring, which would made it difficult to raise more debt for the power firm's capex.

"Essar Oil's business is doing well and is out of CDR and its operations have stabilised. Acquiring VPCL now will give the company power security and a better control over its assets, which will optimise the operating cost and operations, particularly after the commissioning of coal-fired power plant, which is providing a GRM uplift of $1-1.5/bbl," the company said. Essar Oil said it pays INR 590 crore a year for fixed charges to VPCL, but the proposed deal will give it ownership of the asset at a price equal to 3.5 years of fixed charge payment. Shares of Essar Oil ended at INR 62.60.

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