Essar which was earlier planning to delist all its companies from the stock market pulled a rabbit out of the hat. Today it announced a mega 6 Billion Dollar refinery plan. It also plans to issue a 2 Billion Dollar GDR issue at 200/- a share.
Since I had earlier recommended my friends to buy Reliance Petroleum (at 65/-), a couple of friends were asking what do i think about it.
One word… Stay away from it….. don’t even think about it.
Essar are a bunch of cheats. I do not know how they do it, but all its companies always end up in bankruptcy while its promoters flourish. They have never ever made any money for their shock-holders or returned the money borrowed from the banks. Neither in my father’s generation, nor in my generation.
Crisil downgrade Essar Bonds from C grade to D grade.
They even managed to use their political clout to reduce the Coupon rate (interest) on their bonds.
Do you think that such a company can ever again raise fresh capital from the market?
This January they arbitrarily announced that they intend to delist Essar Steel and Essar Oil. They even offered to buy back the shares from the public … as usual at far below the market price… Hence trying to cheat the share holders of the fair value of their much deserved investments.
They indulge in insider trading, artificially manipulating the prices… Best example is that Essar Oil, which never traded above 70/- (and was trading at 61/- on 7th November) suddenly shot up to twice its value a week before the news was public? and not to mention that for the past couple of months the promoters have been buying stock like crazy.
BTW SEC has very stringent listing and compliance norms. The director of the company is personally liable for criminal charges in case of misreporting/insider trading. I am 100% sure the Essar group promoters are not foolish enough to list the company and then spend the rest of their life behind bars.
Its all noise, filter it out.. and if you can short sell the shares, then do it….. (UPDATE: I did short sell this stock on 2nd Jan .. when the stock was trading at 350/- and made quite a killing)
No investor Foreign or Indian will ever pay 2billion dollars at 200/- a share for a share of a company that consistently makes losses (even though refinery margins are at the highest levels ever) and has a meager revenue of a few tens of millions USD.