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Essar Oil's last hope of getting a reprieve in the deferred sales tax case was quashed this week. The Supreme Court disallowed the company's review petition. Earlier in January, the apex Court had reversed the verdict of the Gujarat High Court and directed Essar Oil to refund the benefit it had received under an erstwhile sales tax incentive scheme of the Gujarat Government.
Since Essar Oil's Vadinar refinery began operations later than the specified time, the Gujarat Government held the company ineligible for the benefit. Essar Oil contended that reasons beyond its control, primarily the 1998 cyclone, caused the delay. Given the significant liability amount (around Rs 6,300 crore) and the impact on future profitability, the Essar Oil stock took a sharp knock in January after the adverse Supreme Court verdict. The Court's rejection of the company's review petition this week again took a toll on the stock which dipped more than 5 per cent on Wednesday.
The company has recognised the liability on this account in its December quarter financials, and is in talks with the Gujarat Government for finalising the terms of repayment.
Essel Group stake shoots up in IVRCL
Infrastructure company IVRCL could see a change in the management as the Essel Group might become the single largest shareholder in the company. The group hiked its stake in IVRCL to 12.3 per cent from 4.9 per cent over past few days.
The promoter group currently holds 11.2 per cent, which could go up to 13.8 per cent after the merger of subsidiary IVRCL Assets and Holdings. The Essel Group will have to hike stake to 25 per cent to make an open offer. A lot hinges on institutional action.
Foreign institutional investors (FII) and mutual funds together hold 41.6 per cent in the company. While the mutual fund stake has been fluctuating, FII holdings fell from 57 per cent from the March 2011 quarter to 37 per cent by the December quarter. Earnings for IVRCL have been declining in the past year.
If institutions decide to sell holdings in the light of a possible management change, the promoters of IVRCL will be hard-pressed to prevent the Essel Group from taking control. The company's stock has surged 20 per cent since the initial reports of the stake increase emerged.
Order inflow perks up for Unity Infra
Construction contractor Unity Infraprojects just cemented its transition into a developer by bagging two road projects worth Rs 840 crore. The first involves developing a 76-km section in Rajasthan. The second is a National Highways Authority of India order for a 131-km section in Punjab. The stock moved up 6 per cent in the previous week.
The projects are significant for the company, whose road segment had seen tepid order flows in 2011. As it begins to step up presence in development of projects which have long gestation periods, near-term revenues could still find support from the contracting segment. Funding its development projects will hold the key for Unity Infra's ambitions. Debt-equity is already on the higher side at a consolidated 1.2 times.
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