I have invested insignificant amount in Essar Shipping at the price of Rs.25.00 some four months back. The stock was quite sluggish and movement was between Rs.23.25.
On 01-12-2006 the scrip opened at Rs.24.00 and closed at surprising Rs.28.05 with increase in 16.8%. More surprising was the volume of share traded, on 01-12-2006 the scrip registered total volume of 31,24,039 shares, nearly 20 times more volume then the previous day’s volume of 1,60,775 shares. Probably, someone knew what was going to happen tomorrow.
On next day, nearly same volume remained when Essar Shipping officially informed (http://www.essar.com/shipping/pr/2006_12_02_NoticeStockExchange.pdf) the Bombay Stock Exchange about the Extra Ordinary General Meeting to be held for delisting of the shares.
Looking to the share holding pattern of the company, the resolution was passed and accordingly the share holders decided to de list the company. After the information of being de-listed the price shoot and touching Rs.45.90 ,52 week high, on 04-01-07.
Now small investors ,like me, are wondering what to do next , whether to sell their shares in open market or let the company to buy-back the shares. As the book value of the share is about Rs.50-00, I expect at least that amount to be given in buy-back. Today, I also read in the message board at moneycontrol.com , that the company will be offering 25% more on the market price on the non-trading day declared by the company. However, this appears to be rumor as I am unable to confirm the information anywhere. The company site is least helpful on the matter. The company is keeping silent about the non-trading day and the buy back amount.
Therefore, now I am confused whether to sell my lot now with nearly 80% return on my investment, or wait to reap more 25% on the current market price? I sound bit greedy , am not I?
I have tried to read and understand the Security Exchange Board of India (Delisting of Securities) Guidelines,2003. It says that exit price is to be decided by a promoter for delisting a security. Exit price shall have floor price , and floor price is to be decided calculating average of 26 weeks before the announcement, in Essar case as per my calculation it comes somewhere near Rs.27.00. However, the guideline says that floor is to be decided without any ceiling of maximum price. Having book value of Rs.50.00 is probably the best price anyone could get.
The guidelines contains long procedure to determine at the exit/offer price through book building process and after necessary public announcements, and I hope that works in the best interests of the small time share holders.
I am looking forward to observe the market on Monday , and may sell the shares soon.