Essar Steel Holdings Limited (ESHL), a Mauritius based subsidiary of Essar Global, Limited and the largest shareholder and promoter of Essar Steel Limited, has sought delisting of Essar Steel Limited from The Bombay Stock Exchange and National Stock Exchange. ESHL and the promoter group currently holds approximately 87% in Essar Steel Limited. ESHL has requested the Board of Essar Steel Limited to obtain consent of the equity shareholders of the Company for the proposed delisting of the shares in accordance with the SEBI (Delisting of Securities) Guidelines, 2003 and include ESHL’s intention to de-list the Company in the notice to be sent out to the shareholders of the Company.
The delisting of equity shares of the Company will offer more flexibility in the operations and management of the company, greater efficiencies and at the same time provide an exit opportunity for the shareholders of the Essar Steel.
ESHL intends to de-list the equity shares of the Company from the Bombay Stock Exchange and National Stock Exchange by following the voluntary delisting method. After obtaining the consent of the shareholders, a public announcement will be made in accordance with the SEBI (Delisting of Securities) Guidelines, 2003 for ascertaining the exit price to be paid to the shareholders of the Company.
The above is what appeared on BSEINDIA site and most of the leading newspapers in Jan 2007.
WHAT SHOULD BE THE EXIT PRICE ?
Present market cap. of Essar Steel LTD (ESL )is Rs. 4300 crores or US $ 950 million with Equity of Rs. 1140 crores . Essar Steel has capacity of 4.6 million tonnes of Flat Steel and is the lagest producer in India’s Pvt Sector.
Besides the 4.6 million tonne flat steel capacity ESL also has 8 million tonnes pallete capacity acquired through Hygrade Pallette & Steel Corp of Gujarat and having plants in Jharkhand and Chattisgarh, Balledilla Iron Ore Mines and benefication plant close to Iron Ore mines.ESL has investments in Essar Power with 217 million shares, 1 million shares in Steelco Gujarat and lots of hidden vaue in land and buildings.
Just the valuations of 4.6 million tonnes of Flat steel plant @ US $ 700 million per tonne steel capacity ( same as Tata Steel paid for Corus ) will give its valuation at US $ 3.2 billion or Rs. 126 per share. Add to that 8 million tonnes of Pallette capacity and Balledila Iron Ore mines and associated Benefication plant its other subsidiaries around the globe its investment in ESSAR POWER the minimum EXIT PRICE OF ESSAR STEEL should be Rs. 150 per share.
Investors are advised to revisit the balance sheet of EsSAR STEEL and compare its valuations with CORUS or MITTAL ARCELOR and BID accordingly in the Reverse Book Building
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