Essar steel, oil firms to be delisted

Though Sebi has finalised delisting guildelines, a school of thought says delisting helps companies remain out of corporate governance norms. “Once a company is delisted, it’s no longer under public scrutiny. Delisted companies don’t have to follow stringent corporate governance guidelines,” said BSE dealer Pawan Dharnidharka.

Essar Steel Holdings and Essar Energy Holdings are Mauritius-based subsidiaries of Essar Global. The promoter stake is 87 per cent and 88 per cent in Essar Steel and Essar Oil respectively.

Essar Steel Holdings and Essar Energy Holdings plan to follow the voluntary delisting method. After obtaining the consent of the board and shareholders, a public announcement would be made as per Sebi’s delisting guidelines for determining the exit price to be paid to shareholders.

Once public shareholding falls below 90 per cent, a company can delist. Sebi had scrapped the book building process for de-listing and put in place an alternative pricing mechanism. Under this, the offer price shall be higher than the fixed price, which would be the floor price plus 25 per cent premium. The floor price would be determined by Regulation 20 of SEBI (Substantial Acquisition of Shares and Takeover).

Regulation 20 sets down the norms for the determination of the minimum offer price (in this case floor price). Under the second option, the offer price will have to be over the fair value determined by an accredited rating agency plus a premium of 25 per cent.