The Hindu Business Line : Essar Steel turns active ahead of de-listing

Essar Steel, a BSE Midcap and BSE 500 indices component, is going off the NSE and BSE trading platforms from Thursday even as a group of investors has spurned the promoter entity’s offer to surrender their shares at Rs 48 each — the exit price arrived at by applying the relevant SEBI formula.

According to many of them, the discovered price does not reflect even a fraction of the share’s intrinsic worth. The stock today ended at Rs 59.25, after touching Rs 65.40 on the BSE.

On the NSE, it finished at Rs 59.20. Some 1.38-crore shares changed hands on the NSE and over 1.06-crore shares on the BSE. The strong delivery-based traded volume in the last few days suggested defiant purchases by a section of market players.

Defiant purchases

According to analysts, the discovered price did not represent the proper value of the company. Mr Arun Kejriwal, an independent analyst, felt the price discovery could not have factored in several hidden values. Mr Rajesh Agarwal, Director of CD Equisearch, said a large number of retail investors did not respond to the price offer as they found it unacceptable.

According to Mr V.K. Sharma of Anagram Securities, the price discovery process is not adequate enough to reflect the true value of a company seeking delisting and requires an urgent review. Under the SEBI Delisting Guidelines, promoters may continue to buy shares from the members for six months at the discovered price after the de-listing approval. The shareholders, who have chosen to hold on to the stock, would miss the exit route.

Receive Dividend

However, these shareholders will continue to enjoy all shareholder rights such as voting rights and right to receive dividend along with other benefits arising from various corporate actions of Essar Steel.

In April 2007, Essar Steel had become the country’s fourth largest steel maker after it purchased Algoma Steel of Canada for $1.6 billion and Minnesota Steel of the US for an undisclosed price. But the Minnesota deal entailed an investment of $1.65 billion by Essar for setting up an integrated steel plant in the Northern part of the State of Minnesota.

Interestingly, Minnesota Governor initially had opposed funding the project owing to Essar’s ties to Iran, but relented when Essar gave an assurance that the US laws, regarding trade with Iran, would be abided by the company. Essar Steel Holdings Ltd, the acquirer, first offered to buy up in September the residual 12.92 per cent stake in the company held by public shareholders. The final settlement date was October 8.