Essar Oil sets Rs 146.05 as Floor Price for delisting ~ Critical Questions remain

Essar Oil sets Rs 146.05 as Floor Price for delisting ~ Current Market Price is @ Rs 210 ~ What will be the discovered price ?

Some Critical Questions yet in the air

  1. Six Years ago,LIC had picked up Rs 300 crs+ of Essar Oil in January 2010 at Rs 140 a share ~ Will they be participating in the delisting exercise and at what price? ~ assuming 15% CAGR the price is Rs 320+ ~ hope they support the concerns and interests of the smaller Minority shareholders ~ nasty suspicion that they will not and it’s probably a done deal between Essar Group and them !
  2. Essar Oil Promoter Group Companies have committed, as per SEBI Order in November 2015 that cleared the controversial delisting,that they will going forward pay also any difference incremental between Rosneft Deal price (yet being negotiated) and the actual delisting price .However this commitment is only to those who’s shares have been accepted in this delisting exercise ! What then is the fate of those minority shareholders who do not participate in this delisting exercise or who’s shares are not accepted!?
  3. SEBI Order gets Essar Group Price Differential Commitment only for  stake sell to Rosneft being negotiated ! ~ What if Essar Group does  stake sale  to any other instead !? ~ Recent News Reports talks of interest from others

SEBI & Essar Group need to clarify on Points 2 & 3 above

In fact SEBI should have only given the green signal for delisting once the Rosneft Deal Price was declared

Check out my below blogposts right from June 2014 where I have strongly raised these issues and more to highlight how Essar Group cares little for Minority Shareholder Interests.

If Essar Group  had had their way they would have delisted at a pathetic floor price of Rs 108 last year  ~ In a sense these shares would be then have been on their way to being offloaded to Rosneft at twice or thrice the price !

    

Update on Tuesday,December 8,2015

The Delisting Opens on December 15,2015  and closes on December 21,2015

All those who held the share on December 5,2015 will be dispatched the Offer Documents on December 11,2015

Should a Holder participate in this Delisting  & if so at what Price should he tender ?

This is where the SEBI Order is flawed ! because it closes the door to public shareholders leaving them no option but to tender the shares in the Delisting Offer !

Why?

Because if  a shareholder does not tender in the delisting offer or tenders at above the discovered price to be announced by Promoter on December 30,2015 and his tendered price is not the Exit Price and the Promoter accepts the Discovered Price or offer an Exit Price at it’s discretion even above the Discovered Price but below shareholders tendered price then his shares will not be accepted

Staying away from the Delisting Offer or having tendered shares rejected in the delisting will disqualify the Shareholder from receiving any incremental between Rosneft Deal Price going forward if higher than Exit Price announced by Promoter in this Delisting

Such a Shareholder will thus get only the Delisting Exit Price going forward

On more thing I reiterate ! What if there is no Rosneft Deal but Essar Oil enters into a deal with some other Entity for a strategic stake !? Then the committment by Promoters for any Incremental payable to Shareholders will be off ! as SEBI Order merely mentions such a committment for only a potential Rosneft Deal going forward

The Delisting can only fail if all public shareholders unite and not tender or tender at a much higher Price in excess of Rs 300 or Rs 350 perhaps !

LIC are you listening !? Support the Minority here !

This however does not look likely as special resolution was passed by the shareholders of the Company through postal ballot and e-voting, the result of which was declared on August 6, 2014 and notified to the Stock Exchanges on August 6, 2014, approving the proposed voluntary delisting of the Equity Shares from the Stock Exchanges in accordance with the Delisting Regulations. The votes cast by the Public Shareholders in favour of the Delisting Offer were 37,469,706, which were more than two times the number of votes cast by the Public Shareholders against it.
Two Minimum Acceptance Conditions are critical  
The Delisting Offer is for 142489858 Equity Shares being 28.54% of the public shareholding and the success depends on these two primary contiditions
  1. A minimum number of 92,569,408 Offer Shares being tendered at or below the Exit Price or such other higher number of shares (in the event some of the ESOP options are vested as described in paragraph 4(e), and Equity Shares are allotted in lieu thereof, prior to the closure of bidding period i.e. on the Bid Closing Date (as hereinafter defined) so as to cause the cumulative number of Equity Shares held by the Promoter and the Promoter Shareholders as on date of this Public Announcement taken together with the Equity Shares acquired through the Acquisition Window Facility to be equal to or in excess of 449,284,055 Equity Shares or such higher number of Equity Shares on account of issuance of Equity Shares pursuant to vesting of options as per paragraph 4(e) above constituting 90% of the Share Capital
  2. A minimum number of 50,003 Public Shareholders (25% of number of Public Shareholders holding shares in dematerialized mode as on June 22, 2014) participate in the reverse book building process, in accordance with Regulation 17(b) of the Delisting Regulations, provided that if the Promoter along with the Managers to the Offer demonstrates to the Stock Exchanges that they have delivered the letter of offer of this Delisting Offer to all the Public Shareholders either through registered post or speed post or courier or hand delivery with proof of delivery or through email as a text or as an attachment to email or as a notification providing electronic link or uniform resource locator including a read receipt (referred to as the “LoF Delivery Requirement”), then the mandatory participation of aforementioned number of Public Shareholders is not applicable. Per the Delisting FAQs, SEBI has clarified that the LoF Delivery Requirement provided in proviso to Regulation 17(b) of the Delisting Regulations is deemed to have been complied with if the acquirer or merchant banker dispatches the letter of offer to all the Public Shareholders of the company by registered post or speed post through the Indian Post and is able to provide a detailed account regarding the status of delivery of the letters of offer (whether delivered or not) sent through India Post
One last Thought ! ~ The Public Announcement was made in Business Standard (English)  and stated in the main wordings of the Exchange Notifications and in the Announcement itself ….ring a bell ! ? ~ The Rosneft Deal Story & Possible Valuation too was broken first by Business Standard in June 2015 which said the deal was to be announced in June 2015 itself and an Open Offer would follow ! ~ The Price then was Rs 146 which is the Floor price announced in this delisting ~ I’m not implying anything !
If SEBI is not forthcoming to clarify on the questions I have posed before the delisting,I’m afraid the Public Shareholder in Essar Oil has no other rational and logical option but to exit in this delisting

Update on Tuesday,December 15,2015 ~ Delisting Bidding Commences on BSE & NSE

Till 3.30 pm NSE had seen 35 Confirmed Bids for aggregate 3728525 shares at Rs 240 and 1 unconfirmed Bid for 3061378 shares

BSE had seen 27 confirmed bids for 295712 shares

Seems like 240 is a price decided by a nexus of bidders on the first day

Bidding will go on till December 21,2015

Floor Price is Rs 146.05

Share Price moved up smartly to Rs 223 before settling at Rs 218 trading levels all afternoon  

Remember that a minimum no of 9.26 cr shares need to be tendered from a minimum of 50003 public shareholders

10 thoughts on “Essar Oil sets Rs 146.05 as Floor Price for delisting ~ Critical Questions remain

  1. Dear Gaurav, my relative holds 100 shares of Essar Oil in Physical certificate form. She does not have a demat account yet and has some problems with her official documents, because of which the demat account opening process is delayed. In this case can you please suggest what can be done? Will she be able to get rid of the physical shares without demat account and if so, what will be the price of per share that she can get? Thanks very much in advance. It would be great if i can clarify this with you over the phone. Thanks

    1. Hey Nelson,I hope she has put in her physical bid in the delisting endeavour that ended on Monday,December 21,2015.Dont worry even if she has not….as today SEBI has allowed LIC’s Bid at Rs 262.80 to be valid it now paves the way for the delisting to be soon declared successfull.Need not open a demat account.She will in 2016,as per SEBI Delisting rules again get the offer to sell to the Promoters at the Exit Price in this delisting which will be at least Rs 262.80 as I expect Oil Bidco,the Essar Promoter who is acquiring in this Delisting to accept this discovered price….She must at that time sign the Physical Transfer deed and Offer Form and send along with her 100 shares as instructed

  2. Dear Gaurav. First of all, thank you so much for your kind response. Really appreciate it. I have have a few more questions, it will be very kind of you to advise: 1. How should the shares held in physical certificate form be sold back to the promoters offline based on the exit price? What is the process?

    2. Where can I get proper help with regards to properly filling in the Exit offer form?

    2. How will the company make the payment to the physical shareholders? By cheque / Bank account transfer?

    3. How will the capital gains tax be paid? Will it be directly deducted from the amount receivable by physical shareholders or shareholder have to file it in the IT Returns?

    4. When will we have a final update on Essar, Rosneft deal? Is it better to hold the physical shares till the deal is finalised, or should we sell the shares to promoters in the exit offer?

    5. Exit Offer will be sent by the company separately in the next couple of months and will be valid till 31st December, 2016 right?

    Thanks much in advance.

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