The Essar group’s Ruias are working on a plan to lower their stakes in two listed Indian firms — Essar Shipping and Essar Ports — and in the group’s international arms — US-based Essar Steel Minnesota and London-listed Essar Energy.
While the stake sale in the two Indian companies is to meet with the market regulator’s fiat that promoters should not hold more than 75 per cent stake in a listed entity, the funds raised from the stake sale in the international companies will be used to retire its debt.
A source close to the development said the group would reduce stake in Minnesota Steel, provided the group gets a good valuation. “If the time is right for a share sale, then we will go for it. As of now, the valuations are not looking good even though the US steel industry has now picked up pace,” the source said.
The group’s debt is at around $4.8 billion (Rs 26,470 crore) and the stake sale will help the group restructure its debt both in India and abroad, the source said.
A group spokesperson confirmed the stake sale plan in the Indian companies and said the focus of Essar Steel Minnesota was to complete its $1-billion expansion plan. The group will have to reduce stake in the Indian companies by June next year when the Security and Exchange Board of India’s deadline to bring the stake down to 75 percent expires, the spokesperson said. There is no plan to reduce stake in Essar Energy, the official said.
The Ruias will get Rs 47 crore by selling their 8.7 per cent stake in Essar Shipping and an another Rs 20 crore by selling five per cent stake in Essar Ports based on the share price of the companies now trading on stock exchanges. On Tuesday, Essar Shipping closed trade at Rs 26.40 a share, down one per cent. Essar Port was also trading flat at Rs 94 a share.
The spokesperson said the group was also swapping its rupee loans with dollar loans to cut down interest costs. Essar Steel is converting its $430 million of rupee loans to dollar loans, while another group company, Essar Oil, is planning to raise $ 1.5 billion in overseas loans, the official said. "The idea is to cut finance costs as in India the bank rates are very high and the difference between foreign and local loans is quite significant," the source said.