Essar Group, controlled by billionaire brothers Shashikant and Ravikant Ruia, is considering delisting all its publicly traded units and plans to sell some assets, people with knowledge of the matter said.
The group plans to take Essar Ports, Essar Shipping and Essar Oil private over the next couple of years, the people said on the condition of anonymity. The Ruias are already in the process of delisting Essar Energy from the London Stock Exchange.
Mumbai-based Essar Group wants to buy all the shares it doesn’t already own in its listed units as it considers them undervalued, the people said. The conglomerate is weighing the sale of international outsourcing operations and a US iron-ore business and may sell additional assets after completing the privatisations, the source said.
“This (looking at a potential delisting of entities within the group) has been the thinking internally for some time now,” said another person familiar with the development. He declined to be identified since the matter is sensitive.
There are two main reasons behind this line of thought, said the source. First, the three main firms of the software-to-shipping Essar Group — Essar Shipping, Essar Ports and Essar Oil — have lost significant market value over the last few years and the promoters see this as a good opportunity to consolidate their holdings in these firms. With the imminent establishment of one of the most stable governments at the Centre in the history of Indian politics, under the leadership of an investor-friendly Narendra Modi, key areas of the Indian economy, such as infrastructure, are expected to get a massive push. Consequently, companies engaged in infrastructure services and creation (like Essar Ports and Essar Shipping) are expected to do well going forward.
“When these companies start doing better and overall valuations improve with a recovery in the economy, the promoters may look at divestment of their stake in the future again, maybe to private equity firms,” the person said.
The second reason for any potential delisting, according to this person, could be increased complexities in ensuring compliance with the provisions of the new Companies Act 2013.
The new Companies Act, which came into effect after Parliament ratified it in August, gives minority shareholders greater say in a firm’s dealings, especially those linked to related party transactions and equity transfer within the promoter group.
Essar Group hasn’t always had a cordial relationship with