LONDON (Reuters) - An Indian court ruling has cut the tax bill of a subsidiary of London-listed Essar Energy ESSR.L by $327 million (203 million pounds), in a development that the company said drew a line under its tax problems.
Essar Energy has been wrestling with a tax case at its majority-owned Essar Oil ESRO.NS for nine months. On Thursday it published the details of a ruling by India’s Supreme Court that removed some of the harsher demands made on the company by the Gujarat state government, to whom the monies are owed.
The ruling stated that Essar Oil did not owe Gujarat in western India $327 million in interest on its tax bill, and said that the company could repay the $939 million it owed in tax in instalments over two years.
“The Supreme Court judgement brings to an end the deferred sales tax repayment issue in respect of Essar Oil,” Essar Energy said in a statement on Thursday.
A spokesman said Gujarat had asked for the $939 million to be paid in six months as well as demanding the $327 million in interest.
Shares in Essar Energy, which have lost around a third of their value since the tax issue first emerged in January, closed up 6 percent at 114.7 pence in London.
“The tax payments are less than feared,” said one trader.
Securequity sales trader Jawaid Afsar said the ruling “cleared the air”.
Indian refiner Essar Oil, in which power station-operator Essar Energy owns an 87 percent stake, had been negotiating with Gujarat for more time to pay $1.2 billion in taxes, which it was left owing after a ruling stated that it was no longer allowed to defer sales tax payments.
In July, Essar Oil said it secured a $900 million loan to help settle the tax liability.
Reporting by Sarah Young; Additional reporting by Sudip Kar-Gupta; Editing by Hugh Lawson