The promoters of Essar Shipping said they were abandoning plans to delist the company after an offer by them to buy back shares failed to elicit adequate response.
Essar Shipping’s shares fell 6%, and the company lost market capitalization of over Rs100 crore on a day the Bombay Stock Exchange’s (BSE) benchmark 30-stock index, Sensex, rose by almost 0.5%.
The promoters would have been able to delist the company had their offer received a good response and had the public shareholding fallen to less than 10%.
An Essar Shipping spokesperson said there were no plans to make a fresh offer for a buy back of shares. “This will not affect the company’s restructuring process,” he said.
Essar Shipping had announced its delisting plan in December. The Cyprus-registered Essar Shipping and Logistics Ltd (ESLL), a wholly-owned subsidiary of Essar Global, had said it would buy out 23.54% stake (about 10.03 crore shares) of Essar Shipping from public shareholders and non-promoters.
The floor price for the buy back, which followed the reverse book-building process, was fixed at Rs31.62 per share. In this process, shareholders can quote a number, higher than the floor price, at which they wish to sell the shares.
According to Essar Shipping executives, the company had hoped to acquire about 60 million shares to take the promoters’ holding to 90%, but was able to garner a little over 50 million shares. As a result, the company’s shares will continue to be listed on BSE. The shares deposited in the special depository account of the public will be returned to them. Essar Global is the largest shareholder and promoter of Essar Shipping and holds a 76% stake.
ESLL was created some months ago as part of the Essar group’s restructuring strategy. ESLL has three operating companies under its umbrella—Essar Shipping, Essar Logistics and Vadinar Oil Terminal.
The latter two were earlier subsidiaries of Essar Shipping but were later transferred to ESLL for $215 million (Rs946 crore). ESLL recently raised $200 million from foreign banks.
According to Jigar Shah, director, KR Choksey Shares and Securities, Essar Shipping has been investing aggressively in offshore services and the market clearly differentiates between shipping companies with offshore services and stand alone shipping firms.
“Shareholders see that the company is likely to do well going ahead and expect that kind of valuation,” he said explaining why the buy back offer could not succeed.