Vadinar oil refinery, Gujarat
Essar Oil operates the Vadinar oil refinery in the western Indian state of Gujarat Reuters

India's Essar Oil has been bought by Russian energy giant Rosneft and partners in a deal worth $12.9bn (£10bn).

Russia's state-owned oil company Rosneft confirmed that it had reached a deal to buy a 49% stake in Essar Oil, while a consortium of Trafigura and United Capital Partners will share a separate 49% stake.

More from IBTimes UK

It represents one of the largest foreign direct investments into India and gives Rosneft a foothold in India's retail fuel market.

Essar Oil manages more than 3,500 retail fuel outlets across India and operates the country's second-largest oil refinery in Vadinar in the state of Gujarat.

"The closing of the deal is a remarkable achievement for Rosneft: the company has entered the high-potential and fast-growing Asia-Pacific market," Rosneft chief executive Igor Sechin said in a statement.

"The acquisition of the stake in the Vadinar refinery creates unique opportunities of synergies with existing Rosneft-owned assets and will help improve efficiency of supply to other countries within the region."

Rosneft first entered into talks over buying a stake in Essar Oil in July 2015, with the deal's completion held up due to Essar's large debt load and resistance from lenders.

The Essar Group signed an agreement to sell a 98% stake in Essar Oil to Rosneft, Trafigura and United Capital Partners at a Brics summit in October last year in the presence of Indian Prime Minister Narendra Modi and Russian President Vladimir Putin.

Prashant Ruia, director of Essar Capital, said the proceeds from the sale will be used to repay around $11bn to lenders.

"With this deal, we have completed our monetisation and deleveraging programme, which is the largest undertaken by any corporate in recent years," he stated.

Sources told Reuters that Tony Fountain, former chief executive for refining and marketing at Indian conglomerate Reliance Industries, will be announced as non-executive chairman of Essar Oil following its acquisition.

India's minister of state for petroleum and gas Dharmendra Pradhan said, "I congratulate Essar on the conclusion of the $12.9bn Essar Oil deal.

"An asset, which was truly made in India, has attracted investment interest from world class entities, demonstrating the spirit of dynamic entrepreneurship in India."