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Essar-Rosneft deal: Focus now on rights of minority shareholders

The about $13-billion deal is likely to trigger questions on whether minority shareholders can be paid the difference in valuation, after completion of the delisting process, if the acquisition price by the Rosneft-Trafigura-United Capital Partners combine is higher.

business Updated: Oct 16, 2016 01:27 IST
Ramsurya Mamidenna
(L-R) Andrei Kostin, chief executive of Russia's bank VTB, Igor Sechin, chief executive of Russia's top oil producer Rosneft, and Ravi Ruia, vice-chairman of Essar Group, attend an exchange of agreements event after the India-Russia annual summit in Benaulim in Goa on Saturday.
(L-R) Andrei Kostin, chief executive of Russia's bank VTB, Igor Sechin, chief executive of Russia's top oil producer Rosneft, and Ravi Ruia, vice-chairman of Essar Group, attend an exchange of agreements event after the India-Russia annual summit in Benaulim in Goa on Saturday.(Reuters)

India’s largest inbound foreign acquisition may throw up an interesting fallout on the capital market, mainly for Essar Oil’s erstwhile minority shareholders who exited the company when it was delisted last year.

The about $13-billion deal is likely to trigger questions on whether minority shareholders can be paid the difference in valuation, after completion of the delisting process, if the acquisition price by the Rosneft-Trafigura-United Capital Partners combine is higher.

At the time of delisting in 2015, Essar Oil was valued at $6 billion (then Rs 39,000 crore), where the shareholders were offered the delisting price of Rs 262.80 a share, for exiting the company.

The delisting was completed on December 30, 2015.

An Essar Group spokesperson, when contacted on Saturday, said final details on valuation will emerge only on completion of the deal after receiving regulators’ approval.

“We have earlier communicated that we remain committed on complying with the norms,” he added.

Sebi did not respond to queries HT mailed.

According to Yogesh Chande, partner at Shardul Amarchand Mangaldas, Advocates & Solicitors, promoters of a delisted company are obliged to purchase shares from the remaining public shareholders during the tail period of one year at the discovered price only (price at which delisting was done).

“There is no requirement under the Sebi delisting regulations to increase the said price, post delisting, if there are favourable events of such a nature involving the target company during the tail period of one year.”

“Promoters may in ‘good faith’ offer to pay higher price during the tail period,” he noted. “In that case, the same needs to be paid also to all the public shareholders whose shares have been accepted in the delisting book building process.”

However, such a corporate event happening now during the tail period was not factored in the prevailing market price when the delisting process was being conducted, he noted.

“To that extent, it may be to the disadvantage of those who bought or sold shares during that period on the stock exchange floor (and did not offer their shares in delisting).”