 "Essar")
Market regulator Securities and Exchange Board of India (Sebi)'s move to ask the promoters of Essar Oil to raise the de-listing price, brought cheer to minority shareholders, with the stock climbing over 10 per cent on Monday.
Corporate governance firms, while welcoming the move, have urged Sebi to increase the scrutiny on dealings between Essar Oil and Russia's Rosneft, which is buying a 49 per cent stake in the company.
They want the acquisition price to factor in all the financial transactions between Rosneft and Essar Oil, so that the shareholders get the right payout.
Rosneft is reportedly paying about 50 per cent more than Essar Oil's current valuation for a 49 per cent stake. Shares of Essar Oil ended at Rs 203.5, up Rs 18.5, or 10 per cent.
"The offer by the company would be a fair deal to the minority shareholders, only if Sebi factors in all the financial transactions that Rosneft enters into with Essar Oil and its promoters. The shareholders are entitled to get the right value for their investment. Sebi should watch carefully the company till the entire de-listing exercise is completed," said Amit Tandon, founder, IiAS, which is a proxy advisory firm. Essar Oil had proposed to de-list last year in August. After the Rosneft agreement, lawyers had said the de-listing 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. Another proxy advisory firm added that, in the present circumstance, Sebi has done what it could to protect the interest of minority shareholders. "Sebi's warning the company would need to pay the difference between the floor price of de-listing and the amount received from the deal with Rosneft, is a shot in the arm for minority shareholders. Sebi would keep tabs on the de-listing exercise," said Shriram Subramanian, managing director, InGovern Research Services.
Another legal expert said that keeping tabs on all financial transactions of Essar promoters could be a difficult task for Sebi, as the company could have some transactions in foreign jurisdictions.
The deal size between Rosneft and Essar Oil hasn't been made public yet. The Russian oil firm is reportedly buying $2.8 billion (Rs 18,595 crore) for a 49 per cent stake in Essar Oil, which values the company at $5.7 billion (Rs 37,800 crore).
In comparison, Essar Oil's market capitalisation on Monday stood at $4.4 billion (Rs 29,517 crore). If the deal-size reports are true, the floor de-listing price will be substantially higher than the current market price.
