Sebi-imposed safety net may benefit investors
Essar Oil will soon make a public announcement for the delisting offer and a floor price following the Sebi directive to the company to incorporate a safety net to give investors any upside arising out of the company’s deal with Russian giant Rosenft.
According to merchant bankers, the company will be making a public announcement next week on the reverse book-building offer.
Essar Oil investors have been given a virtual safety net by Sebi, thereby giving them a way for securing their profits. The company is in the process of delisting prior to the stake sale to Rosneft, the world’s largest traded petroleum company.
It has given an undertaking to Sebi to match the delisting price with the offer to be made by Rosneft, which is set to pick up a 49 per cent stake in the Ruias-promoted company.
This means that the shareholder can put his bid in the delisting process and still be secured of the upside in case the promoters are offered a higher price by Rosneft.
However, market experts feel that the sale price to Rosneft would be in the range of Rs 190 to Rs 200 and it would be wiser to book profits at the current market prices.
The Essar Oil stock is currently hovering around Rs 210, which is 8.8 times compared with the industry average of 5.8 times. “This is a good time to exit given the rich valuations,” said a market analyst.
“Investors of Essar Oil are in for a once-in-a-life time gains as the company gets set for delisting. Investors can start tendering the shares once the offer is announced and use the gains for investing in other scrips,” said the leading Mumbai-based stock broker and analyst.
“Sebi directed Essar Oil to match the delisting price with the offer to be made to Rosneft. Investors are thus bound to gain if they happen to sell in the market at a lower price than the offer to be made Rosneft. Moreover, they do not lose anything if the final price at which Rosneft would acquire the Essar Oil stake is higher. That’s the virtual safety net that Sebi has provisioned for,” he added.
Market data also show that Essar Oil has outperformed the market and its peers and has given superior returns on one and two years basis. In the last one year alone, the company has given returns of 80 per cent compared to negative return by the benchmark indices.
Market watchers expect the Essar-Rosneft deal to be thoroughly transparent because the Russian giant, which is the world’s largest publicly traded petroleum company, is virtually state-owned. The main company shareholder (69.50 per cent), OJSC Roseneftegaz is a 100 per cent state-owned company. BP owns another 19.75 per cent and the remaining stake of 10.75 per cent is publicly traded.
Rosneft is also included in the list of strategic companies and organisations of Russia.
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