Essar Oil delists, shells out Rs 3,745 crore Wednesday Dec 30,2015

Essar Oil completes delisting process with Rs 3,745-cr payout

 Essar Oil on Wednesday Dec 30,2015 bought out the entire public shareholding for Rs 3,745 crore for delisting itself from the exchanges.

 Investors got a premium of 80 % as Essar promoters paid Rs 262.80 per share against the floor price of  Rs 146.05. 

This gives the country’s second largest refiner a valuation of Rs 38,000 crore ($5.75 billion).

While going private gives the company operational and financial flexibility as it eliminates going to shareholders or the exchanges for approvals etc., it also gives the company freedom in its current negotiations with Russia’s oil giant Rosneft.

Rosneft had in July signed a preliminary, non-binding agreement to buy 49 per cent stake in Essar Oil. Price negotiations are still on. Essar Oil which has an enterprise value of Rs 65,000 crore expects the deal to be completed in six months.

 Shashi Ruia, founder chairman, Essar said, “We are happy that we have been able to reward our public and institutional shareholders for the faith they reposed in us over the years.” The Essar Group has paid Rs 7,200 crore for delisting its companies, which includes Essar Oil, Essar Ports, Essar Steel and India Securities. A company source said that this dispels the markets’ view that Essar has not been rewarding its shareholders. Essar Oil plans to increase its refining capacity from 20 million tonnes to 30 million tonnes

Note
Essar Oil had initiated the delisting process in June 2014 when the company’s board approved the delisting proposal to acquire 13.7 crore shares, constituting 27.5 % stake, from public shareholders. However, the procedure was kept on hold in December 2014 as the company had to align with the new delisting guidelines announced by Sebi in December 2014.

As per the revised delisting regulations, participation of 25 per cent of public shareholders in reverse book building (RBB) is sufficient for voluntary delisting against a requirement of 50 per cent public shareholding earlier. The market regulator also reduced the timeline for delisting to a minimum 76 days from 137 days earlier, and allowed the use of stock exchanges for delisting of shares.

The revised norms also allow the use of Takeover Code to delist the shares on conditions the company disclose its intent to remain listed or not at the time of announcing the mandatory open offer under the Takeover Code, among other changes.
 

This is the sixth delisting offer under the revised rules. So far, Srinivasa Hatcheries, Fulford India, Gujarat Metal Cast, Panasonic Appliances and The Anup Engineering have successfully conducted their reverse book building