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Stocks

Essar Ports and Essar Shipping To Go Private; Shares Gain Massively

Essar Group companies, Essar Ports and Essar Shipping saw a tremendous jumps in share prices today.

Essar Ports:

Essar_Ports_01

Essar Ports (BSE: 500630; NSE: ESSARPORTS) closed on Friday at Rs. 91.50. It is currently trading at Rs. 108.15. That is a massive increase of 18.20%!

Essar Shipping:

In comparison, Essar Shipping (BSE: 533704; NSE: ESSARSHPNG), which closed at Rs. 19.75 on Friday, is currently trading at Rs. 23.70; an increase of 20%.

Essar_Shipping_05

The massive jumps come on the back of confirmation from the Essar Group, that they will delist both Essar Ports and Essar Shipping from the bourses. The promoters attribute their decision to a perceived lack of investor interest in their stocks, as well as the belief that they would be in a better position to address needs of the companies whilst delisted. 

The promoters hold a combined share of 74.97% of Essar Ports. This group includes:

  1. Essar Shipping & Logistics – 61.15%;
  2. Essar Projects – 13.18%;
  3. Essar Steel – 0.60%;

The promoter share-holding in Essar Shipping looks like this:

  1. Essar Shipping & Logistics – 71.03%;
  2. Imperial Consulting & Securities – 3.32%;
  3. Essar Steel – 0.62%;

That’s a combined total of 75% promoter share-holding.

In letters to the BSE on 11th October, Essar Ports and Essar Shipping separately stated that they had received approval from their respective Boards to delist their shares from the markets.

According to an article in Livemint,

“The promoters believe that the delisting of the share of Essar Ports from the Stock Exchanges would provide the promoter group increased flexibility to support the business and financial needs of the company and enable them to optimally fund the growth initiatives of the company.”

And,

“In its filing, Essar Shipping said the promoter believes that there is a general lack of investor appetite in the sector for various reasons including slowdown in freight market and the cyclical nature of the industry.”

This is not the first time the Essar Group has done so. Earlier in June this year, the group took Essar Oil private as well. This move followed the successful delisting of Essar Energy from the London Stock Exchange; a move that was fraught with serious apprehensions from minority share-holders and independent directors. In fact, both moves were looked at suspiciously by analysts and share-holders. The feeling was that the promoters looked to take the businesses private once businesses prospects started to look good.

The move now to delist Essar Ports and Essar Shipping comes at a very curious time, right before the release of Q2 earnings results.

Looking at the financial results for these 2 companies we see that,

Essar Ports:

Essar_Ports_03

On a year-on-year basis, profits for Q1 2015 had dropped 9.16% to Rs.92.15 cr., from Rs. 101.44 cr. for the previous year. This was despite revenues increasing by 2.11%.

Essar Shipping:

Essar_Shipping_04

Essar Shipping on the other hand, recorded a massive 822.10% drop in profits; they recorded losses to the tune of Rs. 140.16 cr. in Q2 2015, as compared to a net profit of Rs. 19.41 cr. last year.

Is the de-listing a sign of better future prospects for the 2 companies? Will the Q2 earnings show a turnaround in their fortunes? The markets seem to think so: Essar Ports closed at Rs. 108.15 today, up 18.20% from the previous day’s close, while Essar Shipping closed at Rs. 23.70 today, up 20.00% from yesterday’s close.

Disclaimer: We do not own any positions on either Essar Ports or Essar Shipping.