In a significant development taking place in the backdrop of a takeover tussle involving telecommunications operator Hutchison Essar Ltd, the Essar group controlled by the Ruias has decided to de-list its two flagship companies, Essar Steel and Essar Oil, from the stock exchanges. At the current price, the effort will cost around Rs 1,700 crore.
However, industry experts feel that the group will have to fork out upwards of Rs 2,500 crore as the price for delisting will be decided through a reverse book-building process. Under the book-building process, the shareholders will tender the shares at their expected price and the final price will be decided as the average price.
The boards of directors of both the companies are scheduled to meet on January 30 to discuss the proposals, said a company spokesman.
Significantly, both these companies have turned around in the recent past after a long spell of losses. In fact, Essar Oil had started production late last year. It had entered the capital market in some time 1994 at Rs 45 per share. Riding on the steel boom, Essar Steel turned around in 2005.
While they fork out cash to de-list the two companies, the Ruias also have the prospect of raising fresh cash from selling their 33 per cent stake in Hutchison Essar, which industry analysts say could give them elbow-room in consolidating their industrial empire.
Essar Group owns 88 per cent stake in Essar Oil through Essar Energy Holdings Limited (EEHL), a Mauritius-based subsidiary of Essar Global Ltd. Of this, 61.38 per cent is owned in the form of depositary receipts as the company is listed on the London Stock Exchange.
The public holding in Essar Oil is 13.72 crore equity shares of Rs 10 each. Currently the share is trading at around Rs 63.20. At this rate, the Essar group needs to fork out around Rs 867 crore for Essar Oil. However, market experts said that in the reverse book-building process, the actual price would be substantial higher.
In Essar Steel, the group owns 87 per cent stakes. The total floating stock involves 14.72 crore equity shares of Rs 10 each. Currently the share is trading at around Rs 50.15. At this rate, Essar group need to fork out around Rs 736 crore for Essar Steel.