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The Ruias are planning to delist Essar Oil from the Indian stock markets before selling a 49 per cent stake in the company to Russian oil giant Rosneft for $3.2 billion (Rs 20,480 crore). Lawyers said the delisting offer price for Essar Oil would have to be closer to Rosneft's valuation of the company or it would lead to a revolt by minority shareholders.
"Minority shareholders may not tender shares at a lower valuation if they are aware the company's shares will be sold at a higher price later," said R S Loona, managing partner at Alliance Corporate Lawyers.
The Securities and Exchange Board of India withheld Essar Oil's delisting offer last November without assigning a reason. Essar Oil's shareholders had approved the delisting last August. The Ruias hold 90 per cent of Essar Oil's equity.
Essar Oil and Rosneft did not comment on how much stake the Ruias would offload after the deal or whether the company would issue fresh shares. But insiders said Rosneft had agreed to make part-payment for the transaction through oil supplies to Essar Oil for the next 10 years. On Thursday, Essar Oil's shares closed six per cent lower at Rs 178, valuing the company at Rs 25,837 crore. Essar Oil had debt of Rs 25,311 crore in March, according to Capitaline. The Rosneft deal values the company at Rs 38,400 crore.
The deal excludes Essar Oil's coal bed methane gas blocks but includes its 1,500 fuel pumps and the 20-million tonne Vadinar refinery. The company was setting up another 1,500 pumps across the country, Essar Oil told the BSE on Thursday.
Essar Oil's debts rose after the Supreme Court in January 2012 asked it to pay Rs 5,189 crore in sales tax to the Gujarat government with 10 per cent interest in eight quarterly installments starting January 2013. The court held Essar Oil ineligible for sales tax deferment because its refinery started production late.
Analysts said the deal would provide Rosneft access to a world-class refinery and a retail fuel chain, while Essar Oil would receive assured fuel for 10 years.
"In the retail network, more stations will mean more volumes and maybe market share at a later stage. It will also mean land at prime locations. All this can be monetised later," said the chief executive officer of a private oil company.
