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Essar Shipping, Ports & Logistics Ltd (ESPLL) today announced that the Gujarat High Court has approved its Scheme of Arrangement for the demerger of its shipping, logistics and oilfields services businesses.
This demerger will create two separate entities, viz Essar Ports Ltd (existing ESPLL) and Essar Shipping Ltd (resulting company), both of which would be listed on the NSE and BSE, according to a company statement here.
The scheme also includes merger of two wholly-owned investment subsidiaries into ESPLL. The Scheme of Arrangement will become effective upon completion of certain statutory formalities.
Mr Rajiv Agarwal, CEO and Managing Director, ESPLL, said the demerger will help create better value for all the stakeholders. Both companies have attained a critical mass and need focused management, with substantial growth plans lined up. This demerger will help them follow their independent growth trajectories.
The ESPLL Board had, on August 12, 2010, unanimously decided to demerge its shipping, logistics and oilfields businesses into a separate entity. Under the Scheme, ESPLL will transfer its shipping, logistics and oilfields services businesses to its existing wholly-owned subsidiary (the resulting company). In consideration, the resulting company will issue one equity share of Rs 10 face value each credited as fully paid-up to the shareholders of ESPLL for every three equity shares they hold in ESPLL as of the record date.
In addition, the Board has also approved a proposal for amalgamation of two of its wholly-owned investment subsidiaries into ESPLL, for simplification of the holding structure.
The company has a port capacity of 76 million metric tons per annum (MMTPA), which includes 46 MMTPA at Vadinar and 30 MMTPA at Hazira, both in Gujarat, making it India’s second largest private sector port company. It plans to expand this capacity to 158 MMTPA by 2013. The company has committed Rs 8,200 crore (USD 1.8 billion) towards this business, of which Rs 4,600 crore (USD 1 billion) has already been invested.
ESPLL started the shipping business in 1976 and has added the ports business over the last five years. Today, ESPLL is the second largest shipping and oilfields services company in India’s private sector.
The shipping business has a diversified fleet of 26 vessels, including VLCCs, capesizes, Supramaxes, mini bulk carriers and tugs. The company has placed orders for 12 new ships, which are expected to join the fleet over the next 24 months.
The oilfields services business provides contract drilling services to oil and gas companies across the globe. This business owns one semi-submersible rig and 12 land rigs. The company has ordered two new jack-up rigs, which will be joining the fleet over the next 18 months.
The logistics business provides end-to-end logistics services – from ships to ports, lighterage services to plants, intra-plant logistics and dispatching finished products to the final customer. This business owns trans-shipment assets to provide lighterage support services, and onshore and offshore logistics services. It manages a fleet of 4,200 trucks for inland transportation of steel and petroleum products.
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