Essar Group to exit from Indian bourses

MUMBAI: The Ruia brothers, promoters of Essar Group, have decided to completely exit from the Indian bourses.

They are delisting the last of their listed companies - Essar Oil and Essar Steel.

The cost of the acquisition of shares will be in excess of Rs 2,000 crore, a back-of-the-envelope calculation showed.

This is small change for the Ruias, who are expected to get around Rs 25,000 to Rs 30,000 crore when Hutch Essar, in which they own 33%, is sold to the highest bidder.

The holding companies that control and own the two Indian entities are based out of Mauritius, the tax haven located in the Indian Ocean.

Analysts said the Ruias are perhaps replicating the strategy adopted by Anil Agarwal’s London-listed Vedanta Holdings, which owns and controls Sterlite Industries, Hindustan Zinc and Balco.

Essar Steel and Essar Oil will seek approval from their boards for delisting on January 29 and 30, respectively.

What’s on offer for investors?

Vishal Chhabria

The new Sebi delisting guidelines suggest the methods for calculating the minimum price. The first of which is to arrive at a fair value (to be determined by an accredited rating agency) plus a 25% premium.

The second method is to arrive at the ‘minimum price’ per share that the Essar group will have to offer its shareholders. It is based on the average of weekly high and low prices for the preceding 26 weeks, or the preceding 2 weeks (based on thirty days prior to the announcement of the offer), plus a 25% premium on each of the two average prices. Here, the higher of the two averages (26 weeks or 2 weeks) will be the minimum price. Under the second method, the price works out to Rs 56.72 in the case of Essar Steel and Rs 73.44 in the case of Essar Oil (inclusive of the 25% premium).

But, if the price based on the first method is higher than the price arrived at by the second method, then the higher (of the two) will be taken as the ‘minimum price’ to be offered. Lastly, the actual price offered could be much higher, if the buyer, in this case the Essar, decides to offer more.