Essar Oil delisting offer faces 'technical' issues

BSE refers matter to Sebi; non-confirmation raises uncertainty

Essar Oil’s delisting has got mired in “technicalities” with a large block of tendered shares failing to be “confirmed” in time, prompting the BSE to refer the matter to the Securities and Exchanges Board of India (Sebi).

While the promoters' buyback offer got more than sufficient bids, the non-confirmation of this large chunk of shares – presumably tendered by Life Insurance Corporation of India (LIC) – has raised uncertainty over the delisting offer.

The offer, which closed on Monday, is said to have received bids for an estimated 101 million shares, as against a requirement for 92.6 million shares for the offer to succeed.

However, over 19.8 million shares tendered by LIC, remained “unconfirmed” on the stock exchange platform till the scheduled closure of the offer. Sources said the bids from LIC came well within the scheduled time as shares tendered after LIC’s bid got confirmed, but some technicalities led to these remaining unconfirmed. The issue is being looked into by all the entities concerned — Essar Oil, LIC, BSE and the custodian for LIC shares, StockHolding Corporation.

“Due to technicalities relating to timing of the confirmation of some institutional offers received, the matter is being referred to Sebi,” BSE said in a note.

The delisting offer saw shares being tendered at a reverse book build discovered price of Rs 262.80 each, which is at about 80 per cent premium of the floor price of Rs 146.05.

Essar Oil shares had closed sharply higher at Rs 243.35 at BSE on Monday, a gain of nearly 8.5 per cent. However, the stock was down nearly one per cent in Tuesday's trade after hitting a peak of 249.80 in the morning. The promoters have offered to delist the company from bourses by buying out non-promoter shareholding of 28.54 per cent.

“The proposed delisting of equity shares from stock exchanges is to achieve complete operational or financial flexibility in furtherance of the company's business or financial needs and enable promoter shareholders and the promoter to pursue strategic opportunities in respect of its investments,” the company had said in its delisting notice.

While making the delisting offer for Essar Oil, the promoters had said it would be in the interest of public shareholders "as it will provide them with an exit opportunity from the Company in an open and transparent manner at a price calculated by the reverse book building mechanism set out in the Delisting Regulations (of Sebi)."

The promoters have also signed a non-binding term sheet with Russian oil major Rosneft for sale of up to 49 per cent stake in Essar Oil.

If this transaction materialises, Essar Oil promoters will have to pay the difference, if any, between the transaction price received from Rosneft and the delisting price to those public shareholders whose equity shares are accepted under the delisting offer, according to a Sebi order.

ESSAR OFFER

• Bids received for 101 million shares
• 19.8 million shares tendered by LIC remain unconfirmed
• Shares tendered at reverse book build discovered price of ~262.8 each
• Promoters have offered to delist from local bourses by buying non-promoter shareholding of 28.5%