Post RBI nudge, Enforcement Directorate begins probe in Essar Oil share allotment case

The Enforcement Directorate has started an investigation against Essar Oil for delay in the allotment of Global Depository Shares (GDS). The probe by ED was initiated after a request by the Reserve Bank of India.

The development has been confirmed by an ED official.

GDS, generally denominated in the local currency (and occasionally in US dollars), are typically registered with local regulators and may be traded on an exchange and over the counter.

“ED has issued a summon to Ruias (erstwhile owners of Essar Oil) after RBI wrote a letter to us,” said an official on the condition of anonymity.

RBI had written a letter after the company breached the limit of Liberalised Remittance Scheme while issuing Global Depositary Shares.

“There are certain clarifications/information sought by ED in relation to a technical delay in the allotment of GDS by Essar Oil Limited.  The compounding application for the same has already been filed by EOL with the RBI in May 2017.  We are in the process of responding to ED in this regard,” Essar Group said in response to Moneycontrol’s queries.

In 2010, the company allotted equity shares in two tranches - 9,28,44,531 at a price of  Rs 144/- per share aggregating to Rs 1,336.96 crore on 27th April, 2010 and 7,12,92,951 equity shares at a price of Rs 144/- per share aggregating to Rs 1026.62 crore on 28th May, 2010 to an overseas depository. The funds were raised for part financing the cost of refinery expansion project and for other general corporate purposes.

Essar Oil inked a deal with Russian energy giant Rosneft and a consortium led by Trafigura-United Capital Partners for Rs 338.28 per share in October 2016, which was completed in August last year.

The Essar Group concluded sale of its crown jewel Essar Oil which runs the second largest refinery in the private sector in the country with a 20 million tonne capacity and the adjacent captive 58 million tonne oil terminal, a 1,010-MW power plant and over 3,500 fuel outlets to the Russian government-controlled Rosneft for an enterprise valuation of USD 12.9 billion.