Home / Companies / Sebi puts Essar Oil’s delisting on hold

Mumbai: The proposed delisting process of Essar Oil Ltd, the oil and gas arm of the Essar Group, has been put on hold after directions from capital market regulator Securities and Exchange Board of India (Sebi).

In a statement issued to BSE, the company said: “It is hereby clarified that the company had approached the exchange for in-principle approval for delisting of its equity shares. However, as advised by Sebi, the matter has been put on hold till further directions in this regard are received."

However, neither Essar Oil nor Sebi offered any official explanation for putting the delisting process in abeyance.

Since 21 November, the company’s shares have been trading below the floor price fixed for the delisting, which was set at 108.18. On Thursday, shares of Essar Oil fell 3.7% to 92 on BSE.

On 23 June, the company had proposed to delist the shares of Essar Oil. In an emailed reply to a query at the time, Essar Oil had said that it believes that the company requires sustained, substantial investments to develop and grow its business (especially refining and marketing) and full ownership will provide it with increased operational and financial flexibility to support its business and strategic needs.

Essar Oil planned to buy back 137 million shares, or a 27.5% stake, held by the public.

It declined to comment to an email seeking explanations for pausing the delisting.

Sriram Subramanian, managing director and founder of InGovern Services, a proxy advisory firm, said the move is largely a procedural step than a fundamental one.

“There is still some confusion on whether the new norms are applicable to companies already in the process of delisting or not. Also, we have to see whether Essar Oil meets the new criteria if it is applicable to them."

On 19 November, Sebi announced new delisting rules, under which a firm wanting to delist has to ensure that its promoter shareholding reaches at least 90% after acquiring shares from the public, or if at least 25% of the public shareholders tender their shares in a reverse book-building process.

According to BSE, Essar Oil’s current promoter shareholding stands at 71.54% and the remaining is with public shareholders, out of which retail investors constitute 11.18%.

InGovern’s Subramanian said that while it would have been in the interest of shareholders if the delisting process sailed through as they would have got an exit opportunity, temporarily it gives relief to Essar Oil as it defers a cash outgo.

“However, the move should be looked at from a procedural perspective and it will not impact the delisting price in any way," he said.

This is the second attempt of the promoters—billionaire brothers Shashikant Ruia and Ravikant Ruia—to delist Essar Oil after having failed at a similar attempt in 2007.

In January 2007, Essar Energy Holdings Ltd had sought shareholder approval to delist the company in order to gain higher “flexibility in the operations and management of the company".

A similar attempt was made to delist Essar Steel Ltd as well in the year.

While Essar Oil’s delisting failed to sail through due to protest from minority shareholders, Essar Steel managed to get delisted after getting a clearance from the Securities and Appellate Tribunal in December 2007, which had earlier stayed the process heeding investor complaints.

However, most proxy advisory firms have advised shareholders to vote in favour of the delisting as it gives them an exit opportunity from the stock, which has not paid a dividend to shareholders in the last several years.

Although, they have been critical of the company for short-changing shareholders by not sharing the profits that the company has started to earn from its refinery operations, which has turned around after several years.

Essar Oil currently runs an 18 million tonnes per annum (mtpa) refinery at Vadinar in Gujarat and has started clocking one of the best margins in the world due to its ability to process cheap crude oil.

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