Group becomes one of India’s largest conglomerates to own assets privately
The Essar group on Wednesday became one of the largest privately-owned Indian business entities, with annual revenues of $35 billion after completing the delisting of Essar Oil.
The group now has only one listed company, Essar Shipping, which has a market capitalisation of Rs 500 crore (Rs 5 billion).
The delisting of Essar Oil, which is the largest on Indian bourses, paid out Rs 3,745 crore (Rs 37.45 billion) to general shareholders. Prior to this, the Ruias had paid Rs 1,430 crore (Rs 14.3 billion) for delisting Essar Ports.
The group has paid Rs 7,200 crore (Rs 72 billion) to investors to delist Essar Oil, Essar Ports, Essar Steel and India Securities.
Last June, the group had delisted Essar Energy from the London Stock Exchange as well.
Essar Energy listed on the LSE by raising £1.2 billion, valuing its business at £5.4 billion. In 2010, it was the UK’s largest stock market listing in a little more than two years.
In July, Russian oil major Rosneft had signed a deal with the group to buy 49 per cent in its Vadinar, Gujarat, refinery and supply 100 million tonnes of oil over 10 years. Refining comprises over 95 per cent of Essar Oil's business.
Sources said the delisting would pave the way for Essar Oil to finalise its deal with Rosneft. The Essar Group has also secured a $330-million loan from Russian bank VTB to delist Essar Oil.
“Delisting was a prerequisite for the Rosneft deal as it becomes easier to work in terms of compliance and valuation issues,” said a banker.
Dhanpat Nahata, executive director, M&A, Essar, said, “The price of Essar Oil was hovering around Rs 100 level around the delisting announcement. Considering this, the price of Rs 262.80 is a premium of more than 150 per cent."
Essar Oil sells fuel through 1,600 stations in India.
After Rosneft’s entry, the company would increase the number of stations to 5,000 within two years.
The current transaction values Essar Oil at a market capitalisation of Rs 38,000 crore ($5.75 billion).
While the floor price for the delisting was set at Rs 146.05 per share, Oil Bidco (Mauritius), the promoter of Essar Oil, agreed to pay Rs 262.80 per share, a premium of 80 per cent on the floor price.
Of the 142.5 million shares held by public shareholders, the promoters have acquired 101 million shares through the offer, against the requirement of 92.6 million shares for delisting.
The stock was trading at around Rs 100 in June, when the delisting was announced. Shareholders tendered their shares between December 15 and December 21 through the reverse book-building window made available to them under delisting regulations. The company said it would apply for final delisting to the stock exchanges.
After the approvals are received the shares would be formally delisted.
Thereafter, an exit window of one year will be available to shareholders to tender their shares at the delisting price. Essar Oil shares closed at Rs 257 on the BSE on Wednesday.
Essar Oil was listed in 1995 with a market capitalisation of Rs 2,000 crore (Rs 20 billion).
The company has been carrying out strategic investments in the business since commencement of commercial operations at the Vadinar refinery in May 2008, especially in expanding and upgrading refining capacity from nine million tonnes to 20 million tonnes and complexity from 6.1 to 11.8.
"With this transaction, Essar ranks among one of the world’s largest privately held conglomerates with large-scale, world-class operations across the globe, spanning oil refining and marketing, power, steel, ports, shipping, EPC and BPO.
Essar businesses have revenues of over $35 billion and employ more than 60,000 people,” the company said.
Essar Oil's promoters had in June 2014 decided to delist the company stating that full ownership of the company would provide the majority shareholders with increased flexibility.
The delisting proposal was part of the Essar Group's strategy of taking the energy business private. Before the delisting offer, the scrip was trading at Rs 109.40 in June 2014.
Prior to delisting Essar Oil, the group delisted Essar Ports last month. Essar Steel was delisted with effect from December 24, 2007.
