The Essar group is re-organising its transportation and logistic business. The group has decided to merge all its investment companies for the logistics and transportation business with Essar Shipping.
As a first step, Essar Oilfields Services—the company which runs drilling and exploration operations—and several ports and terminal assets will be merged with Essar Shipping. Essar Shipping has posted Rs 1,674 crore revenues during the last financial year.
“We are in the process of bringing together all our investments across various shipping and logistic verticals into a single entity. The merger will pave the way for value creation of our various transportation verticals,” said Sanjay Mehta, MD, Essar Shipping.
The group is planning to merge Essar Oil Field Services, Essar Bulk Terminal Ltd, EBTL (Salaya) Ltd, Vadinar Oil Terminal Ltd and Essar Logistics Ltd with Essar Shipping.
Shares of Essar Shipping was down by 5% to Rs 199.40 at the BSE while the benchmark Sensex posted a gain of 5%.
“Post merger, Essar Shipping would be only one shipping firm with two ports (Essar Bulk Terminal and Vadinar), a logistic company along with its shipping operations. As Essar Steel and Essar Oil are going for expansion, the logistic requirement from the company itself would be more than 100 million tonne from the current 40 million tonne,” said an analyst from a Mumbai-based brokerage firm.
Essar Bulk Terminal, which is currently under construction, is expected to be operational by first quarter of next fiscal, while post merger, EBITDA of Vadinar Oil Terminal would be over $300 million (Rs 1200 crore), he said.
Post merger, the promoters holding in Essar Shipping would go up to 84 per cent from the current 77.46 per cent, investment banking sources said. “The valuation of the company would increase significantly. Ruias may go for a QIP issue at a price range of Rs 500-550 per share. The company would raise anyway between $700-850 million (Rs 3,400 crore) through the issue,” sources said.