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| Essar stock zooms on divestment, acquisition reports |
| BS Reporters / Mumbai Apr 07, 2009, 00:50 IST |
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Riding high on rumours of delisting and acquisition of a refinery, the shares of Ruias-controlled Essar Oil shot up 48 per cent on the Bombay Stock Exchange (BSE) today. The scrip opened at Rs 82.40 and rose to Rs 125 intra-day, before closing at Rs 119.15, its highest closing price in nearly six months.
Essar Oil was the best performer on the BSE 200 Index today. However, the stock price is still much below its 52-week high of Rs 300 reached on April 25 last year.
Denying the delisting rumour, the company spokesperson later said Essar Oil would not like to comment on acquisition of Kenya Petroleum Refinery (KPRL), since it was still discussing the issue with the government of Kenya.
“The share price of Essar Oil has been rising on account of concentrated buying by some big investors, who have exploited the low amount of floating stock in the market. Only 3-4 per cent shares of the company are available and the counter has today recorded a trading volume of 13.3 million,” said SP Tulsian, an independent equity advisor.
The Essar group had tried to delist Essar Oil in 2007. The delisting of another group company, Essar Shipping, also failed due to poor response from shareholders during the same period.
The oil major is close to taking over the management control of KPRL in Mombasa through the acquisition of 50 per cent stake in the refinery. The official announcement is expected in a couple of days. Essar had also agreed to invest $450 million to upgrade the refinery by adding secondary units after the acquisition, said informed sources.
The Indian oil giant had agreed to purchase the refinery’s 50 per cent stake from Shell Petroleum Company (17.1 per cent), Chevron Global Energy Inc (15.8 per cent) and BP Africa (17.1 per cent) for $10 million. The government, which holds pre-emptive rights over the refinery by virtue of its shareholding, holds the remaining 50 per cent stake.
“After months of discussions, the Kenyan government has given permission to Essar to buy stake from the existing stakeholders who want to exit from their investments. Throughout the talks, Essar has maintained its position that it wants management control and the government has agreed to it after reserving their rights,” said a source.
This would be Essar Oil’s first international acquisition in the refining sector. Essar has three exploration and production blocks in Madagascar and one in Nigeria. It also plans to send products from its Vadinar refinery in Gujarat to the African market, which has a free-price regime in place.
The Mombasa refinery is the only refinery in eastern Africa that supplies to Uganda, Rwanda, Burundi, Democratic Republic of Congo and Southern Sudan. The demand for petroleum products in these markets is estimated at 5 million tonnes per annum.
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