Essar Oil eyes delisting sans open offer

The Essar group has sought the market regulator's permission to delist Essar Oil without having to make an open offer.

The promoters had last year purchased GDRs from foreign shareholders, representing 69 per cent stake in the company. However, these GDRs were not converted into equity shares. Under the law, promoters seeking to delist a company have to scale up their holding to at least 90 per cent through reverse book building. So, delisting will first require conversion of these GDRs into equities.

The promoters, in their application to the Sebi, said that since the conversion would not lead to an increase in their shareholding in Essar Oil, they might be allowed to go for delisting without an open offer. Under the rules, a promoter is required to make an open offer if his shareholding increases by 5 per cent in a year.

The Sebi decision will be crucial for the company which announced its delisting plan nearly eight months ago and received the shareholders' nod in mid-March.

The Sebi is believed to have referred the issue to a special panel which is likely to take a decision shortly. "In all likelihood, the Essar group may be exempted from making an open offer," sources said. If the decision goes against them, the promoters will have to launch a mandatory 20 per cent open offer prior to delisting.

In addition to GDRs, the promoters hold nearly 19 per cent stake in the company, leaving the non-promoters' stake at only 12 per cent.