Restructuring its holdings under one umbrella will help bring transparency for Essar Group
Even amidst all the euphoria that’s being generated about listing in the stock markets, there are companies that, quite curiously want out, and the Essar Group is one telling example with its steel business. Earlier this year, the group had sought de-listing of Essar Steel & Essar Oil from the bourses.
While de-listing of Essar Steel remains confirmed at a
price of Rs.48 per share, there are confusing signals with respect to the de-listing of Essar Oil. On one hand, the company has confirmed on November 16 that it has given up its plan to de-list from the bourses. ‘To meet part of the requirement of funds for the expansion project and other corporate purposes, the board has approved the issue of GDS to promoters on a preferential basis, up to a maximum of $2 billion,’ the corporate stated. But this influx of shares would increase promoters’ stake to over 91% & to comply with SEBI guidelines, they necessarily must go for de-listing from the market. Clarity on this aspect is expected soon.
In the case of Essar Oil, staying listed seems to be in line with its expansion plans. Essar Oil has unveiled an elephantine expansion plan of trebling its refinery capacity from 10.5 MMTPA to 34 MMTPA. The company will be pumping $6 billion to fund its expansion plans, which will hold the company in good stead to encash future opportunities. On the other hand, de-listing would be in sync with group’s shareholding re-structuring plan. In the past, the group had got its telecom arm, Essar Tele-Holdings Ltd. de-listed and de-listing of Essar Shipping is underway. Essar’s restructuring plan seems similar to that of Vedanta – the first Indian company to list in London. Reportedly, the group plans to bring its stake in different companies under a single overseas entity, baptised as Essar Global – a Cayman Islands (tax haven) based organisation. Unlike Vedanta, Essar is yet to take a call on Essar Global’s listing. Comments R. K. Gupta, MD, Taurus Mutual Fund on overseas listing, “It helps in attracting global investors to invest in their company. On valuations, it does have a small implications but not a major one.”
While the signals are unclear from the company regarding Essar Oil, it is quite clear that having one holding company would help immensely in bringing transparency & credibility in the market. And considering how it operates neck deep in capital intensive businesses, be it steel, oil, shipping or power, they may be looking at external capital infusion in the near future & it would be a major plus point when it has to take up debt from the international market.
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Source : IIPM Editorial, 2008
Even amidst all the euphoria that’s being generated about listing in the stock markets, there are companies that, quite curiously want out, and the Essar Group is one telling example with its steel business. Earlier this year, the group had sought de-listing of Essar Steel & Essar Oil from the bourses.
While de-listing of Essar Steel remains confirmed at a
price of Rs.48 per share, there are confusing signals with respect to the de-listing of Essar Oil. On one hand, the company has confirmed on November 16 that it has given up its plan to de-list from the bourses. ‘To meet part of the requirement of funds for the expansion project and other corporate purposes, the board has approved the issue of GDS to promoters on a preferential basis, up to a maximum of $2 billion,’ the corporate stated. But this influx of shares would increase promoters’ stake to over 91% & to comply with SEBI guidelines, they necessarily must go for de-listing from the market. Clarity on this aspect is expected soon.In the case of Essar Oil, staying listed seems to be in line with its expansion plans. Essar Oil has unveiled an elephantine expansion plan of trebling its refinery capacity from 10.5 MMTPA to 34 MMTPA. The company will be pumping $6 billion to fund its expansion plans, which will hold the company in good stead to encash future opportunities. On the other hand, de-listing would be in sync with group’s shareholding re-structuring plan. In the past, the group had got its telecom arm, Essar Tele-Holdings Ltd. de-listed and de-listing of Essar Shipping is underway. Essar’s restructuring plan seems similar to that of Vedanta – the first Indian company to list in London. Reportedly, the group plans to bring its stake in different companies under a single overseas entity, baptised as Essar Global – a Cayman Islands (tax haven) based organisation. Unlike Vedanta, Essar is yet to take a call on Essar Global’s listing. Comments R. K. Gupta, MD, Taurus Mutual Fund on overseas listing, “It helps in attracting global investors to invest in their company. On valuations, it does have a small implications but not a major one.”
While the signals are unclear from the company regarding Essar Oil, it is quite clear that having one holding company would help immensely in bringing transparency & credibility in the market. And considering how it operates neck deep in capital intensive businesses, be it steel, oil, shipping or power, they may be looking at external capital infusion in the near future & it would be a major plus point when it has to take up debt from the international market.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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