Exit Offer For Essar Oil: Fill & Download for Free

Write an email to company secretary and ask for buyback . However not sure how will they respond to minority stake holder.

Delisting is the word for this phenomenon. You must have heard of Vedanta delisting that took place this month. Vedanta, which was trading on both the exchanges went for voluntary delisting of its shares from the share market.Delisting usually happens when a company stops its operations, merges with another company, wishes to expand or restructure, declares bankruptcy, wants to become private or fails to meet the listing requirements. When delisting is a voluntary decision, the company makes payments to investors and then withdraws its stocks from the exchange. The stock exchange can also force a company to delist if it does not comply with the rules. To put it simply, when a stock is removed from the stock exchange permanently, it is called delisting.delisting of sharesDelisting is the route undertaken by companies to make their companies private from the public.Delisting is beneficial to companies in the sense that compliance and regulations get reduced once they are delisted.Delisting has been carried on in the past voluntarily when promoters get too many restrictions from the stakeholders to take their company forward or when they do not want to keep up to the listing norms from the exchanges.Thus for the ease of doing business many companies delist their shares and many also delist to play with frauds and irregularities as they are no more listed so they are not required to adhere strictly to norms laid down.Delisting is a process in which the stocks listed on the bourses i.e. on stock exchanges are delisted from trading.It means permanent removal of shares from the stock exchanges and hence they are unavailable for trading.A company must meet listing standards; each exchange has its own set of established rules and regulations.Some companies choose to delist themselves when they figure out, with the help of cost-benefit analysis, that the costs they incur by being publicly listed outweigh the benefits it offers. Companies can request for delisting when they are bought by private equity firms where new shareholders will reorganize them.Let us look at voluntary delisting first. When forced delisting happens, it leaves investors in a tricky position since they have a minimal choice but to sell the stocks off at whatever price is being offered at that moment.What happens during Delisting of Shares?In case of voluntary delisting of shares, the shareholders are offered to tender their shares to the company at a floor price determined by the reverse book building process.The delisting will only be successful if the requirement of 90% of the shareholders agrees to it, otherwise, the process is not completed and delisting doesn’t happen.In the case of involuntary delisting, the delisted company’s, whole-time directors, promoters and group firms get debarred from accessing the securities market for stipulated years from the date of compulsory delisting.Promoters of the delisted companies are required to purchase the shares from public shareholders as per the fair value determined by an independent valuer.Even if we are participating in a delisting we should keep in mind to check if there are more Individual holders or more Institutional holders in that company.Because normally its seen that if the Institutional holders are more and the stock prices have fallen like 9 pins then you can expect a decent price which can be higher than the floor price laid down by the promoters of the company during delisting.But if the promoter’s shareholding is more in the company than chances of getting higher prices then laid down as floor price by the promoters becomes less.Thus before participating newly into a delisting, one should always check the current shareholding pattern to understand their chances of making money from the delisting.The promoter group has made an offer to acquire all the balance shareholding (subject to a minimum of 90% post-offer) to voluntary delist the company from stock exchangesShareholders can quote a higher price for tendering their shares. If promoters are serious about delisting, they may have to shell out a higher price than the indicative offer price just like Essar Oil.The final exit price will be determined in such a way that it would increase promoter shareholding to 90%.If a person does not tender unknowingly or knowingly during the delisting period than they can tender it within the year of the delisting closure date.The promoters will then have the discretion to accept or reject the final exit price.Once all the approvals are in place, the delisting process will take 3 to 6 months subject to delays due to litigation.The recent buzz of Vedanta to Delist its shares:Vedanta Resources (the promoter) has agreed to buy back the public shareholding of Vedanta Ltd at a floor or indicative offer price of Rs 87.50. This price is not the final price.The Company will then require approvals of minority shareholders by way of a special resolution adopted through postal ballot.This would require at least two times votes in favor of the de-listing proposal. In addition, Vedanta would need to obtain regulatory approvals in India and the US, given its ADRs listed on NYSE and approvals from its creditors and Exchanges.It will then set a final floor price and initiate a reverse book building process.The promoter group currently owns 51.06% (excluding ADRs) and 50.14% (including ADRs) of Vedanta while the rest is held by institutional investors and minority shareholders.In the prior times we have seen various companies opting to the voluntary delisting route to delist its stocks.For instance, Essar Oil had previously set a price band of Rs 146.05 per share for the shareholders to tender their shares, but later the final delisting happened at 80% premium to the floor price at Rs 262.80 per share.The Essar Oil delisting process, first mooted in 2014, took 4 years to conclude amidst regulatory hurdles and opposition from shareholder advisory firms.Also, we have seen involuntary delisting i.e. order to delist the shares by SEBI in stocks like Amar Remedies, Supreme Tex Mart, etc which were forced to delist due to non-compliance.Delisting of Shares Tax implicationNow there are two things to it either I don’t have the share and want to buy it before the exdate to take advantage and make some quick bucks.Or I have the share since a long time that is holding period of more than an year and I want to give it for delisting.So in the first case I will have to pay Short term capital gains tax which is prevalent in our country India according to an Individuals tax slab.And in the second case since my holding period is more than an year thus I need to pay a flat tax of 10% on my profits so made due to delisting.Now obviously if I do not make any profits or I make a loss then I need not pay any tax on this transaction of mine.Voluntary delistingIf a company wishes to delist voluntarily, a premium to the regular price of the shares is generally offered to the shareholders. When an investor sells delisted shares, the transaction is taken off the exchange. So, any profit that is made is judged as a capital gain. If the delisting happens a year after the security has been purchased, capital gains tax is not charged. However, if the delisting takes place within a year, whatever gain is made will be taxable, based on the tax slab of the individual.Involuntary delistingInvoluntary delisting happens when there is a violation of the regulations, or the failure to meet the minimum financial expectations. The term monetary standard refers to the capability to maintain the share price at a certain minimal level, the financial ratios and level of sales. If a company fails to meet the listing requirements, a warning of non-compliance is issued by the listing exchange. If the company does not address this issue, the stocks are delisted by the listing exchange.How does it affect you?Now, the question is, how does the delisting of a company affect a shareholder? In case of voluntary delisting, in which a company removes its shares from the market on its own, it makes payments to shareholders to return the shares they hold, and then removes the shares from the exchange. The delisting is regarded as successful only if the shareholding of the acquirer and the shares offered by the public shareholders together make up 90% of the company’s entire share capital.A voluntary delisting never happens suddenly. Investors are offered enough time to sell off their stocks. If an investor chooses to hold on to the shares after the delisting, he or she will continue to enjoy legal and beneficial ownership of the shares the person holds.

There was an interesting article in The Hindu regarding the fire sale (meaning - sale of company’s assets because of debts) of Indian Corporate Assets, to tide over the bank loans crisis. I am sharing that article with you here.‘For sale’ tags on airports, roads, ports, steel plants, cement units, refineries, corporate park, among others, are visible.We are seeing what is effectively India Inc.’s biggest ever fire sale. It’s even bigger than the government’s planned divestment target.The Reserve Bank of India’s (RBI) has decided to clean up the balance sheets of Indian banks, which are collectively saddled with Rs five lakh crore of bad loans, by the end of this fiscal. So, the banks have started cracking the whip on Indian companies for repayment of loans. For most affected firms and groups, this will mean they will be forced to sell prized assets to repay their ballooning debts.We are seeing ‘for sale’ tags on airports, roads, ports, steel plants, cement units, refineries, malls, corporate parks, land banks, coal mines, oil blocks, express highways, airwaves, Formula One teams, hotels, private jets, and even status symbol corporate HQs. Substantial stakes in firms, and in some cases entire companies, are on the block.The Hindu reviewed leading corporate houses with billion-dollar loans riding on them, and the results are startling. The top 10 business house debtors alone owe Rs 5,00,000 crore to the banks. They will be forced to sell assets worth over Rs 2,00,000 crore.Reliance Group (Anil Ambani)The Anil Ambani-led Reliance Group alone owes Rs 1,21,000 crore of loans to the banks and had an annual interest liability of Rs 8,299 crore against earnings before income tax of Rs 9,848 crore. Some of the group’s firms, like Reliance Infrastructure and Reliance Defence, don’t earn enough to service the interest outgo.Assets put on sale by the Reliance Group include about 44,000 telecommunications towers (valued at Rs 22,000 crore) and optic fibre and related infrastructure (Rs 8,000 crore) from Reliance Communications (RCom), its flagship firm. Weighed down by about Rs 40,000 crore of debt, RCom has posted a loss of Rs 154 crore in FY14-15, and has continued to post losses in the first three quarters of FY 15-16, accumulating losses of over Rs 2000 crore until December 31, 2015; it is likely to end that fiscal with a net loss too. The company is valued at Rs 13,440 crore, less than a third of its total debts. However, RCom plans to reduce its debts to Rs 10,000 by selling Rs 30,000 crore of telecom assets.Reliance Infrastructure (R-Infra) is sitting on a pile of debt of Rs 25,000 crore as of February. In November 2015, it agreed to sell a 49 per cent stake in its electricity generation, transmission and distribution business in Mumbai and adjoining areas to Canadian pension fund Public Sector Pension Investment Board (PSP Investments). The transaction is expected to reduce debt of Rs.7,000 crore attached to the distribution business. It agreed to sell its cement business to Birla Corporation for Rs 4,800 crore in February, and is looking to sell its entire roads portfolio, valued at Rs 9,000 crore, for which three international bidders have been short-listed. R-Infra’s EBIT stands at Rs 1,686 crore, against interest liability of Rs 1,974 crore. Its market capitalisation at Rs 14,476 crore is Rs 10,000 crore lower than its debt. By sale, of cement, road and the Mumbai power distribution businesses, the company expects to be debt free on standalone basis by the end of this fiscal.Reliance Capital, with debt of Rs 24,000 crore has sold stakes, in phases, in its mutual fund and life insurance businesses to Nippon Life Insurance for Rs 3,461 crore to allow the latter to increase its stake to 49 per cent in each of the businesses. It further plans to raise another Rs 4,000 crore by the end of 2016-17 by selling non-core assets, including proprietary investment book and by inducting a partner in its general insurance business. Reliance Capital’s debt includes its lending portfolio – commercial lending and housing finance- of about Rs 18,000 crore and claims to have a debt-equity ratio of 1.77, the lowest in the industry, as of December 31, 2015.Mr Ambani is also looking to exit the media and entertainment businesses, under Reliance Broadcast Network Ltd (RBNL), for Rs 1,500 –Rs 2,000 crore.His foray into defence — the recently-acquired Pipavav Defence & Offshore Engineering, rechristened Reliance Defence — is sitting on debt of Rs 6,800 crore against its current market capitalisation of Rs 4,895 crore. The loss-making company with negative EBIT of Rs 306 crore has an interest liability of Rs 347 crore a year.Ruia’s Essar group (Shashi and Ravi Ruia)Shashi and Ravi Ruia’s Essar group has gross debt of Rs 1,01,461 crore. The group is looking to sell about 50 per cent stake of its family silver, i.e., Essar Oil’s 20mtpa (million tonnes per annum) Vadinar refinery, for Rs 25,000 crore. It also plans to bring in a financial partner for its 10mtpa steel business that currently has a debt of Rs 40,000 crore; a 49 per cent stake in the steel facility will be valued at about Rs 25,000 crore. The debt-laden group is also looking to sell stake in its ports business. Essar Steel and Essar Oil each account for one-third of the group debt, and Essar Power, one-fifth.Adani group (Gautam Adani)The billionaire Gautam Adani’s Adani group, with Rs 96,031 crore debt, is under pressure to sell its stake in the Abbott Point coal mines, port and rail project. The Adani Group’s debt stands at Rs. 72,000 crore. Last year, Standard Chartered bank had recalled loans amounting to $2.5 billion as part of its global policy of reducing exposure in emerging markets. Global lenders have backed out from funding the $10-billion coal mine development project. State Bank of India has also declined to offer a loan despite signing an MoU to fund the group with $1 billion. An Adani spokesperson declined to offer any comments on the issue.Jaypee group (Manoj Gaur)Manoj Gaur’s Jaypee group’s debt is over Rs 75,000 crore. The group has agreed to sell its 20mtpa of cement assets to Kumar Birla-led Ultratech for Rs 15,900 crore. This will leave its listed entities with about 6mtpa of cement capacity, three thermal power plants, one hydropower plant, an expressway project and land parcels. It is looking to sell most of these assets at the right price, but buyers are not easy to come by. Aside from selling stake in its land parcels and the Yamuna Express Highway, the group is looking to sell its remaining cement plants for Rs 4,000 crore and its Bina thermal power plant for Rs 3,500 crore. In the last year, the group has defaulted on payment obligations worth $350 million. Analysts say its capacity to service its debt has not improved.GMR group (GM Rao)G.M. Rao’s GMR group was one of the first debt-ridden companies to sell off assets; it has already offloaded stake worth Rs 11,000 crore in its roads, power and coal assets in the last two years. Despite this, its total debt has actually gone up: from Rs 42,349 crore at the end of FY13 to Rs 47,738 as of March, 2015. The group is planning to raise about Rs 5,000 crore this year by selling land parcels, energy assets and stake in airport subsidiary. Last month, it announced it was selling part of a road project in Karnataka, to help reduce debt by more than Rs 1,000 crore. It also plans to sell 30 per cent of its stake in its airport arm, which is valued about Rs 10,000 crore.Lanco group (L Madhusudhan Rao)The Lanco group has debts of Rs 47,102 crore. It completed the sale of its Udupi plant in FY16 for Rs 6,300 crore (15 per cent of FY15 debt). Debt levels have continued to rise, up 6 per cent in FY15. The group plans to sell power assets worth Rs 25,000 crore to de-leverage its balance sheet and retire debts of about Rs 18,000 crore. It is also planning to sell a one-third stake in the Australian coal mine it acquired in 2011 for $750 million.Videocon group (Venugopal Dhoot)Despite the Videocon group selling its stake in its Mozambique gas fileds for Rs 15,000 crore, gross debt has continued to rise: it is up 10 per cent year-on-year to Rs 45,405 crore, while net debt has remained largely flat at Rs 39,600 crore. Last month, it sold its spectrum to Bharti Airtel for Rs 4,600 crore. “If you minus last month’s spectrum sale amount of Rs 4,600 crore which will be paid directly to the banks, then debt comes to Rs.34,000 crore. To decrease debt further, we will be liquidating assets worth Rs 5,000 crore this year so the net debt of the group will be around Rs 29,000 crore,” Videocon Industries chairman Venugopal Dhoot told The Hindu adding that out of this net debt, Rs.21,000 crore has been taken for oil and gas ventures in Brazil, Indonesia and across the globe, where the group and ita partners have discovered oil and gas reserves. So, domestic debt of around Rs 8,000 crore will be serviced.GVK group (G.V. Krishna Reddy)To repay some of its debt of Rs 34,000 crore, the GVK group is in talks to sell 49 per cent of its airport subsidiary, which has an enterprise value of Rs 10,000 crore. Last month, it agreed to divest its 33 per cent stake in BIAL to Fairfax India Holdings Corp for an aggregate investment of Rs 2,149 crore. The company is also exploring the possibility of bringing in equity investors into Hancock Infrastructure Pvt Ltd, its holding company for its rail and port projects in Australia. A GVK spokesperson in reply to an e-mail query by The Hindu said, “As part of our corporate policy, we do not comment on any speculation in the media. While it's public knowledge that we are considering various options for reducing our debt, we regret we cannot respond to any of your queries.”Reliance Industries (Mukesh Ambani)India’s largest debtor, Mukesh Ambani’s Reliance Industries (RIL), has a total debt of Rs 1,87,079 crore (up from Rs 62,500 crore as on March 31, 2010, mainly because of the Rs 1,50,000 crore roll-out of Reliance Jio), the biggest among all corporate houses, and the largest ever in Indian corporate history. But it’s also one of the best-rated firms in servicing its interest, so banks are happy to offer RIL loans at competitive rates. Analysts believe that huge debt may weigh down the profitability due to interest outgo and depreciation after the commercial roll-out of Reliance Jio, if it is not able to scale up quickly.Tata GroupThe Tata Group, India’s largest corporate group, with over 100 companies, wants to sell its UK steel business, which came as part of the $12.9 billion acquisition by Tata Steel of Corus in 2007. Tata Steel had invested over $ 2 billion as capital expenditure in its UK steel business and it has now written down the value of its investment of $2.9 billion, meaning the value of its UK steel business is almost zero. The company’s consolidated debt was $10.7 billion on September 30, 2015, with the total long-term debt of its Europe business at about $4.3 billion.The othersAmong other corporates,• Naveen Jindal-led Jindal Steel and Power Limited has agreed to sell a 1,000 MW power plant to his elder brother Sajjan Jindal at an enterprise value of Rs 6,500 crore and is looking to sell other assets to reduce debts of Rs 46,000 crore.• DLF Ltd, India’s most valuable property developer, has sought expressions of interest from several top global investors to sell a 40 per cent stake in its rental assets arm as it seeks to pare debt. The rental assets arm holds about 20 million sq.ft of leased-out office space and is valued at about $2 billion,• India's largest sugar producer Shree Renuka Sugars Ltd has declared its Brazilian unit bankrupt and has filed for protection in the country. The company plans to fully exit from the National Commodity & Derivatives Exchange (NCDEX), as part of a strategy to sell all its non-core assets to reduce debt.• The Sahara group’s sale list is long: 86 real estate assets, a 42 per cent stake in Formula 1 team Force India, four airplanes, and its hotels: the Sahara Hotel in Mumbai, Grosvenor House, London, the New York Plaza Hotel, and The Dream New York Hotel.• Almost all of Vijay Mallya's assets are on sale by the banks.Quenching the fireDespite all the desperate deleveraging, the financial stress at these groups has intensified: all of them saw further increases in debt in FY15. These debts have grown seven-fold over the past eight years and account for 12 per cent of system loans, according to Credit SuisseAs groups like Jaypee and GMR cut back on capex and sold assets, their debt and EBITDA have deteriorated further, mainly because they sold their best assets, which were contributing to as much as 70 per cent of their EBITDA. For Jaypee, Lanco, Essar, and GMR, about half their debt has already been downgraded to Default by rating agencies. For GMR and Videocon, absolute debt has continued to rise despite asset sales. Lanco’s Udipi plant sales reduced debt levels by 15 per cent, but that project contributed to 69 per cent of its FY15 EBITDA. Videocon too hasn’t seen any reduction in debt levels.Investment advisor SP Tulsian said that when you have gangrene in your body, you need to chop off that part to survive; “Similarly, Indian firms need to sell off assets to deleverage their balance sheets or they will die sooner or later. For, banks will take control of their assets and sell them to recover dues.”However, Morgan Stanley, the global financial services firm believes that the worst of India's corporate debt crisis seems to be over as companies are reporting positive Free Cash Flow (FCF) for only the second time in two decades.In its Asia Insight Report tilted “India – Macro meets Micro,” Morgan Stanley said that the distress in corporate India's balance sheet is unchanged for the past four years and lists out the following problems of corporate sector:It’s a balance sheet recessionCorporate debt to equity is at all-time highThe debt service ratio is at a new low. The BSE 500 index companies have about 4 times their operating income to pay interest expenses compared to around 10 times in the boom yearsInterest to sales is approaching an all-time high, hurting net margins and impeding debt serviceability.Excess return on capital (ROCE minus the prime lending rate) is at all-time lows and in negative territory. This means that companies are earning less on their investment than the cost of their debt.Tulsi Tanti’s Suzlon became the first casualty of the banks' recovery drive. In 2015, it was forced to sell its largest international subsidiary, Senvion, bought for €1.4 billion euro in 2007, for around €1.1 billion. The sale helped Suzlon cut down its debt of Rs 16,500 crore to Rs 10,500 crore, and reduce its interest liability from Rs 1,600 crore to Rs 800 crore a year. More companies from indebted sectors — power, infra, steel, realty for example — will be forced to emulate Suzlon and go for rapid asset sale in the hope of staying afloat until better times.Source credits: The Hindu - May 08 2016 Edition.Image credits: Google Images