Essar Oil delists, shells out Rs 3,700 crore

Essar Oil on Wednesday bought out the entire public shareholding for Rs 3,745 crore for delisting itself from the exchanges.

Investors got a premium of 80 per cent as Essar promoters paid Rs 262.80 per share against the floor price of Rs 146.05. This gives the country’s second largest refiner a valuation of Rs 38,000 crore ($5.75 billion).

While going private gives the company operational and financial flexibility as it eliminates going to shareholders or the exchanges for approvals etc., it also gives the company freedom in its current negotiations with Russia’s oil giant Rosneft.

Rosneft had in July signed a preliminary, non-binding agreement to buy 49 per cent stake in Essar Oil. Price negotiations are still on. Essar Oil which has an enterprise value of Rs 65,000 crore expects the deal to be completed in six months.

Mr Shashi Ruia, founder chairman, Essar said, “We are happy that we have been able to reward our public and institutional shareholders for the faith they rep-osed in us over the years.”

The Essar Group has paid Rs 7,200 crore for delisting its companies, which includes Essar Oil, Essar Ports, Essar Steel and India Securities.

A company source said that this dispels the markets’ view that Essar has not been rewarding its shareholders. Essar Oil plans to increase its refining capacity from 20 million tonnes to 30 million tonnes.

According to unofficial sources, Rosneft is offering $2.4 billon for a 49 per cent stake which values the company at Rs 32,000 crore. The company spokesperson, however denied this figure saying it is pure speculation.