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Business News/ Companies / News/  Ruias get board nod to delist Essar Oil from Indian bourses
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Ruias get board nod to delist Essar Oil from Indian bourses

Ruia brothers' holding firm holds 71.22% stake in Essar Oil

Essar Group on 20 June had announced its intention to delist Essar Oil from Indian bourses.Premium
Essar Group on 20 June had announced its intention to delist Essar Oil from Indian bourses.

New Delhi: The board of Essar Oil Ltd (EOL) on Sunday agreed to its promoters’ proposal to delist the company from Indian bourses. After delisting Essar Energy Plc from the London Stock Exchange (LSE), the Ruia brothers-controlled Essar Group on 20 June had announced their intention to delist Essar Oil from Indian bourses.

Essar Oil in a statement said its board of directors met on Sunday to consider the delisting proposal. It agreed “to consent to the delisting proposal pursuant to and in accordance with Regulation 6(I)(e) of Sebi (Securities and Exchange Board of India) delisting regulation". The board agreed to seek the consent of the shareholders of the company for the delisting proposal by way of postal ballot and e-voting. In a notice to BSE, Essar Oil said it had received a letter from its promoter, Essar Energy Holdings Ltd (EEHL) for voluntarily delisting of the equity shares of the company from BSE and the National Stock Exchange (NSE) by purchasing shares held by public.

Mumbai-based Essar Group wants to buy all the shares it doesn’t already own in Essar Oil. Turning it private would give billionaire brothers Shashikant Ruai and Ravikant Ruia a free hand to revamp the companies. Currently, the company’s public shareholders hold 137.123 million equity shares or 27.53%.

The Ruia brothers’ holding firm EEHL, a company incorporated in Mauritius, holds 71.22% stake in Essar Oil. The delisting proposal, EEHL said, was as part of its business strategy of taking the entire hydrocarbon/energy business private (unlisted) following the delisting of shares of Essar Energy from LSE on 10 June. “EEHL believes that the company requires sustained, substantial investment to develop and grow its businesses (especially the refining and marketing business). Full ownership of the company will provide EEHL with increased operational/financial flexibility to support the company’s businesses and strategic needs," the promoters said in the letter to Essar Oil.

The proposed delisting was in furtherance of the strategic intent of the promoters to achieve greater flexibility for equity infusion into the company. “EEHL believes that the delisting of the company’s equity shares will be in the interest of the public shareholders of the company as it will provide them with an exit opportunity from the company at a price determined in accordance with the reverse book building mechanism set out in the Sebi delisting regulations," the promoters said in the letter to Essar Oil.

The price payable by EEHL for the acquisition of the public shareholders’ shares would be the price at which the maximum number of shares are tendered in a reverse book-building mechanism.

Several market experts instantly rejected the offer calling it a move by the company to deny shareholder value at a time when the prospects for the company are improving.

This is the second attempt of the promoters—brothers Shashikant Ruia and Ravikant Ruia—to de-list EOL after having failed at a similar attempt in 2007. In January 2007, EEHL had issued a similar statement seeking shareholder approval to delist the company, saying it would gain higher “flexibility in the operations and management of the company, greater efficiency and at the same time provide an exit opportunity for the shareholders" of the company.

A similar attempt was made to delist Essar Steel Ltd too in that year.

While EOL’s delisting failed due to protests from minority shareholders, Essar Steel Ltd was delisted after getting a clearance from the Securities and Appellate Tribunal in December 2007, which had earlier stayed the process heeding investor complaints.

This time too minority shareholders and investors in the company are expected to move against the delisting offer unless the company pays them a better price.

On Friday’s close, shares of EOL closed at 108.40 per share, up 1.64% from Thursday’s close. The company’s share price has shot up by almost 110% since the beginning of the current fiscal from 51.65 a share as on 4 April to 108.40 on 20 June.

On Monday, EOL shares were up nearly 5% at 113.80 apiece at 9:43am on BSE, while the benchmark Sensex was trading 0.18% higher at 25,150.03.

Mint’s Promit Mukherjee contributed to this story

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Published: 22 Jun 2014, 06:59 PM IST
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