Essar Energy Plc rejected a possible buyout bid from its majority shareholders, the Ruias, saying the offer of about 900 million pounds ($1.50 billion) undervalued the London-listed oil and gas company.
The decision comes as a shot in the arm for minority shareholders such as Henderson Global and Standard Life, who were vocal about their displeasure and had termed the offer from Essar Global Fund Ltd (EGFL) as opportunistic.
Essar said last week that EGFL had made a possible offer of 70 pence per share for the 22 percent stake it does not already own in the company.
India's billionaire Ruia brothers - Ravi and Shashi Ruia - are founders of the privately owned Essar Group whose interests span energy, telecoms, steel and shipping. They are also 'beneficiaries' of EGFL.
Ravi Ruia and his nephew Prashant Ruia are board members for Essar Energy.
An independent committee set up by the company to assess the offer said the current proposal from EGFL did not take into account the company's long-term growth prospects.
"The independent committee is fully committed to safeguarding the interests of minority shareholders," Philip Aiken, chairman of the committee, said in a statement on Monday.
EGFL declined to comment on the independent board's decision. Henderson Global also declined to comment, while Standard Life was not immediately available for comment.
Standard Life said last week that the fund's plans would deprive minority shareholders of the company's future growth value.
Essar Energy has faced a string of problems since its listing in London nearly four years ago, including slow growth in its Indian operations, delays in getting coal licenses, a tough tax regime and a fall in refining margins at Stanlow, Britain's second largest refinery.
"It probably doesn't surprise us that the independent board would appear to be taking a long-term view," Adam Forsyth of Arden Partners told Reuters.
"In the long term there's potentially more value (to the company) than the bid."
The company said it had also appointed Greenhill & Co to act as an independent financial adviser alongside J.P. Morgan Cazenove.
J.P. Morgan Cazenove sponsored Essar Energy's IPO, helped it sell convertible bonds and buy Stanlow.
Essar Energy's shares, which have lost more than 80 percent of their value since listing on the London Stock Exchange in May 2010, were down 1.7 percent at 63.70 pence at 1233 GMT.