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Essar Oil surges to Rs 200+ on SEBI Order for Delisting~5 Questions for SEBI!

Essar Oil surges to Rs 200+ on SEBI Order for Delisting ~ 5 Questions for SEBI !

Essar Oil again seems to be getting away !

SEBI should have shown some muscle and teeth and independence in ordering  either :

  1.  Compulsory Delisting of Essar Oil for the all the continuing  Corporate Governance Issues it keeps raking up heedless to minority shareholders concerns and even other warnings! or
  2. Delisting only post announcement of Price at which Russia’s Rosneft is negotiating under an understanding written agreement to acquire a 49% stake in Essar Oil ~ what’s the hurry by Essar Group to delist Essar Oil now before they announce Rosneft Deal price !

Instead Essar Oil Promoter Company,Essar Energy has received what it sought from SEBI …a relaxtion on timelines of two months from the date of  November 6,2015 the SEBI Order  for the voluntary delisting and  Five days instead of two days for the despatch of documents  to shareholders and permission to delist

Essar Energy ,who filed the SEBI Application for Relaxtion in timelines,of course has agreed ( like it had any other choice !) to :

  1. Revise the Floor Price in the Delisting upward from what it had declared in 2014
  2. Pay the difference subsequently ,if any, to shareholders who tender their shares in the delisting offer and which are accepted, between the Delisting Price & the Price negotiated with Rosneft for taking over 49% of the Equity
Essar Group states there is no agreement yet that has been arrived at with Rosneft on the Price and in fact had told SEBI they were willing to pay the above difference if the Rosneft Deal took place within a year !…what if they deliberately delayed it over a year !?…thus SEBI has rightly said no timeline for this should be there
Just further reconfirms the manipulating mindset of the Essar Oil Promoters in depriving minority shareholders of a fair price for delisting ~ they are also grappling more serious accusations in the 2G Telecom Scam that’s with the CBI

If you recall Essar  wanted to delist at a floor price of just Rs 108 in 2014,even before they announced the Rosneft Deal being negotiated ! ~ I had raised serious corporate governance questions then and was quoted in the media for these ….fortunately SEBI put the Essar Oil delisting on hold at floor price of Rs 108

But now I have 5 questions for Prashant Saran of SEBI who has signed this Seven Page Order and I’ve re-read it  !

  1. Why do you not proactively consider Compulsory Delisting for Essar Oil for the ever growing Corporate Governance Issues so as to invoke a 10 year ban on it’s Promoters from accessing Capital Markets again?
  2. Why allow the Voluntary Delisting before the several complaints received  by you as cited in the SEBI Order have been resolved ~ particularly the Accounting & Non Disclosure in Accounts Complaints which you are referring to ICAI for investigation ?   
  3. Why allow the Voluntary Delisting before Rosneft Price is announced !?
  4. SEBI Order is silent on this ~ What is the status of  those Minority Shareholders who decide not to participate in the Delisting but wish to decide on this later for Essar Group to buy their shares out only after Rosneft Deal Price is announced  !?
  5. Don’t you think in interest of Investor Awareness &  Protection it should be made mandatory for SEBI to put up on it’s website the names of all listed companies where investigations are pending proactively or reactively on complaints or for any other reasons along with the details of the matters being investigated ?….this has been a long standing view of mine for several years as it will greatly help in managing investing risks before any SEBI Order is actually made

No 4 above is important now that SEBI has allowed the delisting  ~ The Order is explicit in that Essar Energy will be responsible to pay any difference between delisting price and Rosneft fixed price within a specified time of two months of public announcement  to only those shareholders who have tendered  their shares in the delisting and which have been accepted ! ~ what about other shareholders who have not participated in the delisting or whose shares have not been accepted in the offer  !? ~ they too should get the full Rosneft Price if higher than the delisting price ! ~ this cannot be assumed and needs to be explicit in the Order ! 

I’m sure this is an oversight by SEBI !

Whatever !….my view remains on what SEBI should have done as expressed in the two options at the beginning of this blogpost !

I have been vocal on the corporate governance issues in the  Essar Oil Delisting Endeavour from 2014 and have been quoted in mainstream media for this… these past four  blogposts to get a sense of the attempt to short circuit the interests of minority shareholders


4 thoughts on “Essar Oil surges to Rs 200+ on SEBI Order for Delisting~5 Questions for SEBI!”

  1. Wonderful analysis Gaurav. Your analysis on this issue is spot on. SEBI has done little to protect the interests of minority shareholders in many cases. This is one such issue. Hope the messages reaches SEBI bosses and they take some action.

  2. Pingback: Essar Oil sets Rs 146.05 as Delisting Floor Price~ ?s remain | Gaurav's Blog

  3. Do you think the same story will be repeated in the case of VEDANTA? Both the promoters are equal in their treatment of minority shareholders. Anil must have also concluded a secret deal which will take place after delisting

  4. Gaurav Parikh

    Hi Arun,don’t wish to speculate on whether Agarwal’s have a secret deal post a successful de-listing of Vedanta…but it’s clear that both the Ruias of Essar Oil and Agarwals of Vedanta care a damn for being fair to minority shareholders in the de-listing process…their sense of entitlement is what gets me…what I’m truly appalled and angry really is how the board of directors of Vedanta that has big names as Independent directors approved the de-listing at the low offered price which becomes the floor price…what was their reason & was there any dissent? SEBI regulations need to be amended to make it mandatory to disclose this…also it should be mandatory that no offer can be below the book value from latest audited figures…as shareholders too have approved if the de-listing the only recourse now for the minority shareholders for thwarting a de-listing at such a low price is that most if not all of them should tender bids much higher than the book value & ensuring that 90% of shareholding can be attained by the promoters only at that high price which they can either accept or give a counter offer… in Essar Oil de-listing it was SEBI that paused the process after exchanges had cleared it at a low floor price of ₹ 108 let’s see what transpired in the case of Vedanta…it will be a slap in the face of Indian Equity if Vedanta some how manages to delist at a low price…just pray the institutional shareholders don’t abet this…as a precursor of what’s expected to pan out, markets are already driving the price up, Cheers, Gaurav

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