I don't think the business is going to go bankrupt or collapse. The banks will keep it afloat considering the fact they want their money back with interest which is worth a lot more than forcing an asset sale through bankruptcy..
What has happened to this share is way overblown based on short term weakness.
Still holding, with a huge loss, but I believe the share price has dropped more than it should have.
Parkside, you should pop down to their office in India yourself and give the Brothers a letter and in near future when this share does go up, as I would not want to be in position to look like an ass. There have been high number of shares being sold, maybe it is because of pressure from the UK listing authorities' to have minimum free float requirement of 25 per cent.
The 1.1x interest cover is one broker forecast and is for 2013 and no improvement in 2014. I don't think given what's happening ebitda will be that high! It all sounds like carnage frankly! His tone is terrible.
I have just spoken to Mr Lidiard myself. I managed to get a bit more than the corporate speak that is quoted below. None the less, the key points aren't particularly soothing:
1) They don't recognise next years forecast 1.1x interest cover which has been muted by sources unknown to me. Broker consensus is £1.49bn EBITDA v £804m interest costs. Albeit I acknowledge that brokers haven't exactly been on the money with this one.
2) Talks with Indian banks about dollarising debt with existing Indian Lenders was going well but tas slowed in the past couple of months - clearly the lenders are happy getting 12% on rupee debt and are reluctant to change. Let's hope they can keep chipping away at them.
3) Ongoing talks with Chinese Development Banks on funding sales to Petro-China.
3) Asset disposals. Not much they can sell. I raised Stanlow as a possibility - they think not much demand for euro refinery facilities at present.
4) They aim to have dollarised £2bn by next March. Fingers crossed on that one.
I am currently sitting on a hefty loss, and may just swallow it and get out first thing tomorrow. I though the share may have bottomed last week, clearly not and the fear it this will continue to head south.
I managed to get the below response from Mark Lidiard at Investor Relations at the end of last week. Basically nothing new;
I can also assure you that Essar Energy management and the board take their fiduciary duties to shareholders very seriously. I would encourage you, for example, to look at our recent half year results disclosure, which is very reasonable and on a par with other companies in the energy sector similar to our own. These results are subject to an audit review and our full year results are subject to full audit, so all information we put out is verified and accurate.
To come to your main question on share price performance, everything that Debashree has put below is accurate. However, the reason why, I believe, the share price has fallen to such low levels is that there are concerns over our high leverage and liquidity and how we get that under control. In order to get this under control we are reliant on the refinancing of certain debts and potentially raising new debt and we are reliant on certain factors within our business, some of which are outside of our control, to improve cash flow. Some of these are outlined below such as regulatory clearances within our power business, increased gas prices, deregulation of petroleum products (all in India) and improvements in refining margins more generally.
There are signs of positive progress, but some of the concerns are currently outweighing progress on the ground.
We have in place a plan to address all of the issues we face and are diligently pursuing each item. Like any business, not everything is within our control.
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