Their first delisting bid in 2007 failed but Essar Oil’s promoters managed to pull it through this time, despite much opposition from minority investors and proxy advisories about shareholders being forced to exit, just when the company turned the corner.

Final exit price On Wednesday, the Ruias successfully delisted their flagship energy company Essar Oil, creating the largest corporate privatisation in India so far, by valuing the company at ₹38,000 core.

The final exit price discovered by the reverse book-building process is ₹262.80 – 80 per cent higher than the floor price of ₹146.05. Wednesday’s closing price on the BSE was ₹257. To complete the process, Essar Oil will pay ₹3,745 crore to shareholders who tendered their shares. The company received bridge financing of $330 million from Russia’s VTB Bank to fund the payout, which a spokesperson said will be completed by December 31, 2015.

In August 2014, minority shareholders of the Ruia-promoted Essar Oil had voted to approve the delisting of its shares from stock exchanges. In its postal ballot note to public shareholders in August 2014 justifying the need to delist, Essar had said, “The company (Essar Oil) needs sustained, substantial investment to grow its business, especially the refining and marketing business. Full ownership of the company will provide the acquirer with increased operational/financial flexibility to support the company’s business and strategic needs.”

The process was mired in procedural delay at stock exchanges and questions raised about the company’s deal to sell 49 per cent stake to Russia’s Rosneft. The case went to capital market regulator SEBI, which extended the time frame for delisting. Now, the company announced, of the 14.25 crore shares held by public shareholders of Essar Oil, the promoter Oil Bidco (Mauritius) Ltd, acquired 10.1 crore shares through an offer made to shareholders, as against the requirement of 9.26 crore shares for delisting. Shareholders who have not tendered their shares in the delisting offer can offer their shares to the promoters at the delisting price for one year from the date of delisting. If the deal with Rosneft goes through at a higher per share price than the exit price for delisting, the difference will later be paid to shareholders.

Very attractive returns In an email interview, Dhanpat Nahata, Executive Director, Mergers and Acquisitions, Essar, said, “the exit price of ₹262.8 was determined by shareholders through a reverse book-building process. That price is a premium of over 80 per cent to the floor price of ₹146.05. Such returns are very attractive and are significantly higher in comparison to its peers and the industry average in the past two years. Moreover, please see that Essar Oil’s market capitalisation has soared to ₹38,000 crore at the de-listing price, from ₹2,000 crore in 1995.”

But investors are still unconvinced. A report by proxy advisory Stakeholders Empowerment Services released earlier this month noted the deal with Rosneft implies that the promoters will relinquish considerable stake in their company and they would no longer have the “full ownership” they wanted. On the other hand, if the promoters intend Rosneft to be an owner, by law it would be required to make an open offer to public shareholders.

SES says the Essar Oil should not go ahead with the delisting because the shareholders gave their approval before they were aware of a likely deal with Rosneft. Nahata argues shareholders have “got an attractive exit price now and they will also get the upside, if any, from Rosneft transaction.”