On last Friday, the reverse delisting exercise of Essar Shipping came to a close after a week long extension from March 9 to March 16. This is probably among the last few companies to delist before the Securities and Exchange Board of India (Sebi) examines its plan to change the delisting rules.

Sebi has proposed a change in the reverse-book building rules to make them more company-friendly and eliminate the role of retail investors in the price-discovery process. We are told that Sebi’s amendments are based on corporate complaints that reverse book-building is cumbersome and can be manipulated by a few retail investors. Is that true? Let us look at the recently closed Essar Shipping issue to see what really happens.

The Essar group has announced plans to delist all its companies from Indian bourses and started the process with Essar Shipping. In the 1980s and again during the primary market mania of the early 1990s, the group quickly raised large sums of public money in multiple companies. The funds were often diverted to incubate new projects; some of these were started in the listed companies and then spun off, others were set up as unlisted entities. The group ended up in a financial mess and even defaulted on its international repayment commitments. The listed companies remained in the doldrums until fairly recently and repeatedly restructured its debt and repayments; however, the promoters’ private investments seem to have thrived.

Notice the daily reports in the media about their estimated wealth, in the run up to the acquisition of Hutch shares by Vodafone or their international business plans. Every Essar company, whether it is Essar Oil, Essar Steel or Essar Shipping has caused anguish to shareholders as the shares traded at a fraction of their face value of Rs 10. Essar Steel shares were even issued at a high of Rs 200. Investors later lost half the face-value in capital restructuring. Just when investors were hoping to earn some returns, the group dropped a bombshell and announced plans to exit from the bourses and list their shares overseas.

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