Equity Watch, Uncategorized

Essar Shipping Don't get floored by the floor price of Rs. 31.62

Essar Shipping Ltd ( ESL )  is 32 years old copany.It was incorporated on April 5,1975 under the name Karnataka Shipping Corporation Limited (KSCL).In 1983 under a scheme of amalgamation Essar Bulk Carrier Ltd (EBCL)was merged with KSCL and its name changed to Essar Shipping Ltd.Over the years South India Shipping Corp was acquired by ESL and merged with the company. Today ESL is one of the largest Private Sector Shipping company.

Now  Essar Shipping and Logistics Ltd (ESLL ) wants to acquire  upto 100 million Equity shares of ESL and thus DELIST the company from BSE.

In the Reverse Book Building process which ended yesterday on 9th march 2007, about 30 % shares were offered at prices ranging from Rs. 31.62 to Rs. 900. Bulk of the shares were offered at Rs. 75.If Ruia’s declare an Exit Price of Rs. 75 vs. CMP of Rs. 48 they can receive almost 23 % of the shares. However those who have submitted bids can revise or withdraw the BID submitted  before the final settleent date which has been fixed as 14th March 2007.

Now looking at the wide range of BID prices and low CMP what should be the Exit Price that offered by Ruia’s to make a  WIN WIN for both the promoters and the investors.

Present Book Value of ESL share is Rs. 55. With Equity Capital of Rs. 426 crores,market capatalisation is  Rs. 2100 crores, assets amounting to Rs. 2024 crores and loans of Rs. 1185 crores. But besides this Essar Shipping holds the following assets /investments which are not reflected in the Essar Shipping  assets. And they are:

  1. 125 million shares of US $ 1 each in Essar International  
  2. 849 million shares of rs. 10 each in Vadinar OL Terminal
  3. 463 million shares of ESSAR SISCO SHIP MGT CO 
  4. 3.8 million shares of Essar Oil
  5. 1 million shares of Rs. 10 each in Hutchison Essar
  6. 1.9 million shares of Energy Transportation International
  7. 10 million shares of Essar Steel
  8. 2.4 million FCD of Rs. 600 each in Reclame Commercial and Securities Ltd.

 

 Now even at Book value the above EIGHT  assets should add Rs.150 per share to ESL. Just 1 million shares of Hutchison Essar are worth more than US $ 1 billion.It appears that the immediate trigger to delist the company came from the valuations of Hutchison Essar which was acquired by VODAFONE for US $ 18.6 billion .

Investors are advised to again visit the  balance  sheet  of  ESL and withdraw their BID before 13th March and wait for a better Exit Price to be declared by Ruia’s who have networth of more than US $ 8 billion today, and acqisition of 100 % of ESL will add another US $ 3-4 billion to their networth.

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article. 

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