Shares of Essar Energy fell sharply on Wednesday, as Mr Ravi Ruia said he would temporarily step down as the Chairman of the London-listed company as a “good corporate governance measure”, following the charges levelled by the CBI against him and other executives of the Essar Group, Essar Teleholdings and Loop Telecom.
Mr Prashanth Ruia will take over as interim Chairman. Mr Ravi Ruia said he was “confident” that the charges would be dismissed and he would resume his post as chairman.
In charges filed on December 12, the CBI alleged the group violated Clause 8 of the guidelines governing the mobile telecom UAS licences by withholding facts about the size of its stake in Loop Telecom, creating a “complex corporate veil” and using Loop Telecom as a “front” to acquire 2G licences in 2008.
The Essar Group has denied the charges and pledged to take legal recourse, also arguing that it had been singled out, while others accused of this violation hadn't faced similar CBI charges. The company has maintained that the charges will not have any impact on Essar Energy's business operations.
However, a London-based analyst, speaking on condition of anonymity, expressed his “deep concern”, while acknowledging that the firm had taken the “responsible” decision for Mr Ruia to step aside, in recognition of investor concerns.
“This is not good news,” he said. Essar Energy shares were down 3.7 per cent at £1.71 on Wednesday. Its share price has fallen sharply from £5.71 at the start of 2011.