Essar group does have the history of delisting

There is a huge hue and cry about the stocks Essar Steel and Essar Shipping going much above the discovered price. The discovered price for Essar Steel is Rs 48. The floor price for Essar Shipping is Rs 36.

The rule book says that once the promoters cross 90% of holding after open offer, they have to give six months window for others to tender in at the discovered price. The price discovery is done by seeing the price at which the company received maximum number of bids. Ideally, the investors who did not participate in the open offer should tender their shares during this open window if the open offer is successful. If they do not tender it, they are still eligible for the dividends paid by the company. This is at the cost of illiquidity of the stock. Essar Steel promoters seems to have managed to garner shares to take their holding above 90% and hence the others will get Rs 48 if they tender their shares. So, there is no reason why the stock must have gone up.

It is a different story for Essar Shipping. The open offer failed as only 6 cr shares were tendered when 7 cr were required. Even then there is no reason why the scrip should move from Rs 40 to Rs 64 in four trading days.

Essar group was successful with delisting of Essar Teleholdings. They seemed to have paid a hefty price for that. Here are some details that could be useful.
Name: Essar Teleholdings
Bankers: Edelweiss
Issue size: 1.68 lakh shares
Total number of shares: 50 lakh
Floor Price: Rs 4949
Discovered Price: Rs 4990
Amount Paid: 84.1 Cr
Offer announcement: 16th Sep
Offer Start Date: 25th Sep 2006
Offer End Date: 27th Sep 2006
Delisting Date: 22nd Jan 2007