The Essar Group has undertaken the delisting process for some of its businesses in the last few months.
Dollarisation a step to bring debt currency in line with business
Prashant Ruia
CEO
Essar Group
Below is the transcript of the interview
Q: On delisting…
A: The company which we delisted was Essar Energy from the London market. It was a bit of getting affected by what happened in India over the last 3 years and especially in the4 sectors which we were in – power sector, oil and gas sector.
Q: Why delist at a time when things are looking up? You did delisting last year, now you are doing that with Essar Oil, why?
A: Essar oil is more of a corollary of the Essar Energy plan because Essar Oil is largely held by Essar Enegry. We certainly felt that the kind of – especially in London in Essar Energy the valuations were not inline with what the business should have demanded and it was strategic view from our point to take that company private.
Q: It isn't that you prefer to be away from the scrutiny that public listed companies have to face, the regulatory issues, is that was has driven your decision because I keep recalling this conversation I had with Shashi Ruia many years ago and he told me it is too difficult to stay listed in our country, there are too many questions asked of you. It is much easier to do business as a private enterprise and at that time I did not know he was being so prescient. Now in the last six years I see you guys have pretty much fulfilled exactly what he was saying.
A: I would certainly say it is true especially if the public shareholding is a very small percentage. If you are the minority shareholder especially in the international stock exchanges and now the Indian stock exchanges are following the international stock exchanges but the minority shareholding and the rights which are being given are certainly becoming very onerous for the majority shareholders. I am sure this debate is on it is going to be a lot more as the rules keep changing but we felt it was at least in the UK for a very small minority share we felt it was becoming very onerous. However that was not the main reason, that was one of the reasons.
Q: When will you be able to finish the delisting of Essar Oil?
A: I don't have a particular date. The process is on. We continue to await some approvals.
Q: These are SEBI approval on a previous matter that sort of had to do with some bonds or something like that. So no timeline as yet?
A: I don't want to comment on that.
Q: One of the other things I am told you have been working on is the dollarization of your debt. I am just curious to know where you have reached in that process, how much further to go and given the current environment, we are seeing the dollar get stronger, we are seeing rates potentially rising in the US in the second half of this year. How are you relooking at corporate finance?
A: Basically as a group we have followed a couple of strategies; one was bring the currency in line with the business and most of our businesses are dollar linked businesses, whether it is the oil and gas business or steel business and in a way we were actually having debt in rupees and revenues and earnings in dollars. So, from a risk prudent discussion it was sensible to bring it in line and most of our peers are actually already in dollars.
Essar Oil stock price
On January 23, 2015, Essar Oil closed at Rs 111.10, up Rs 0.15, or 0.14 percent. The 52-week high of the share was Rs 132.50 and the 52-week low was Rs 44.50.
The company's trailing 12-month (TTM) EPS was at Rs 13.03 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 8.53. The latest book value of the company is Rs 16.38 per share. At current value, the price-to-book value of the company is 6.78.
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