Stocks of Essar companies registered significant gains on Monday after proposed listing of group’s

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energy business on London Stock exchange (LSE) through a special purpose vehicle. The exercise will generate $3 billion to fund the group’s acquisition and expansion plans.

Top officials from the conglomerate promoted by brothers, Ravi and Shahi Ruia, — the fifth-richest Indians — confirmed the planned listing on the London Stock Exchange. However, Essar Group’s official spokesperson did not divulge any further details.

Essar promoters propose to sell close to 20-25 per cent of their stake in energy business to raise nearly $3 billion. The funds will be utilised to finance $8-9 billion expansion in petroleum and electric power generation sectors. The deal would put the value of Essar’s energy businesses at $12 billion. A final decision on fund-raising may be decided in six weeks. The money will be mopped up through sale of promoters’ stake in Essar Energy and listing it at the LSE, said an industry official, requesting anonymity. The group has appointed J P Morgan and Deutsche Bank as advisors for the issue and listing.

Essar Oil scrip took a leap on Monday by 6.43 per cent at the Bombay Stock Exchange (BSE). It closed at Rs 149. The stock has advanced 133 per cent in the past year, exceeding the benchmark Sensitive Index’s 106 per cent gain. In addition, Essar Shipping and Logistics soared by 3.79 per cent to close at Rs 73.90 on BSE. The move will help Essar raise funds at better valuation overseas as compared with domestic market, said Amit Jain, partner of BMR Advisors. In addition, it will set a benchmark price for future in case the company goes for more such sale of promoters’ equity, Jain added.

Companies find it more attractive to list on overseas bourses, said Anil Chopra, group chief executive officer of Bajaj Capital. International market is more mature and transaction time is much less, Chopra said adding that most of the financial investors find it easy to invest in companies traded on Nasdaq or LSE.

Indian companies including Reliance Industries and Bharti Airtel are bidding for assets overseas to take advantage of cheaper valuations after the worst global financial crisis in 70 years, Bloomberg reported on Monday. They (Essar) are looking to acquire a stake in Shell’s three refineries, so this could be an attempt to raise more money to do that, Swarnendu Bhushan, an analyst of HDFC Securities told Bloomberg.

When contacted, Nikhil Vora, managing director of IDFC-SSKI declined to comment on the deal as the company is working on some Essar projects. At the upper limit, the deal would also be on par with India’s largest domestic IPO, the $3 billion listing of Reliance Power in early 2008, Financial Times has reported. The size of the listing shows the resurgence of corporate India as it moves ahead with aggressive capital expenditure plans, particularly in infrastructure projects in the power generation and oil sectors, the report said.