The open offer by the promoters of Essar Oil (EOL) to buy off publically-held shares in the company kicks off on Tuesday. This follows an offer by Rosneft of Russia to buy 49 per cent stake in Essar Oil, India’s second-largest oil refiner, for up to $2.5 billion. Here are some points — salient as well as ticklish — regarding the open offer.

What is the floor price of the delisting offer? How has it been computed?

The floor price for the EOL delisting offer is ₹146.05. This has been computed in accordance with the computation mechanism provided under the SEBI (Delisting of Equity Shares) Regulations, 2009, and amended thereafter.

What is the bidding period for this delisting offer?

Bid period starts on December 15, and closes on December 21.

What is the quantum of shares proposed to be bought back through the buyback offer?

EOL’s promoters currently hold 35.64 crore shares, forming 71.46 per cent of the capital base. For the buyback to be a success and culminate in a delisting, the promoters now need to buy back 9.25 crore shares, constituting 18.54 per cent shares, which will bring up promoter holding to 90 per cent, the threshold for delisting of the shares.

What is the status of the transaction with Rosneft? How does it impact the public shareholders of EOL?

* Following the announcement of the non-binding term sheet earlier this year, Rosneft is currently undertaking due diligence of the company. While no agreement has been reached with Rosneft on the key terms of the transaction, including the transaction price, there is widespread optimism of the deal going through.

* Promoters had offered an undertaking to SEBI (which is also a part of the SEBI order dated November 6, 2015) that should the delisting price be lower than the price received by the promoters in the potential transaction with Rosneft, the public shareholders who exit through the delisting offer will receive the same price that the promoters receive from Rosneft.

* Accordingly, this undertaking protects the interests of the public shareholders and ensures that they would receive the same price for their shares, as the price received by the promoters from Rosneft.

* This provides an opportunity to the public shareholders to participate in the delisting offer, regardless of speculation about the eventual price with Rosneft, since they are assured of receiving the price received by the promoters from Rosneft in case the same is higher than the delisting price for the shares of Essar Oil.

To which public shareholders would the difference between the delisting price and the transaction price with Rosneft be paid?

* Based on the SEBI order, the difference, if any, between the transaction price received by the promoters and the delisting price, will be paid to those public shareholders who tender their shares in the bidding period of the delisting offer (December 15-21) and to those who tender their shares in the exit window. Exit window is the period of one year post delisting of EOL, wherein the remaining public shareholders can tender their shares.

* However, as detailed below, it is more tax-efficient for public shareholders to tender in the bidding period as against the exit window and still be entitled to any incremental difference between the transaction price with Rosneft and the delisting price.

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