Vedanta de-listing offer price Rs 87.50~Come on Mr Anil Agarwal !

Vedanta de-listing offer price Rs 87.50~Come on Mr Anil Agarwal !

Promoter Group of  Vedanta Ltd has proposed a voluntary de-listing at an indicative offer price of Rs 87.50~are the over 7.3 lakh minority shareholders from Alibag !? …apologies to the people of Alibag

Some would term this as De-listing Duplicity ~ but I would not go that far for you’re a Promoter taking advantage of this Covid-19 crisis caused plunge in Share Prices to de-list at a low price while complying with the SEBI Pricing Formula

Promoter Group Company Vedanta Resources Ltd,London has conveyed to listed Vedanta Ltd that the Promoters  want to buy out minority shareholders of Vedanta Ltd at an indicative price of Rs 87.50 !

Even the Book Value of Vedanta Ltd was Rs 167 at March 31,2019 on a consolidated networth of Rs 62297 crs and Equity of Rs 372 crs of Face Value Rs 1  and rose to Rs 188 on a networth of @ Rs 70000 crs as on December 31,2019

But’s there’s more to this as you move through this blogpost to sense that this is not the first time that the Promoter Family of Brothers Anil & Navin Agarwal  have short changed the minority shareholders in their group companies or for that matter even have other Industrial Groups in their listed companies at the time of de-merger or de-listing

Look at the speed !

  • Tuesday May 12,2020 ~ Vedanta Ltd notifies the BSE & NSE that the Board of Vedanta Ltd has scheduled a Meeting on Monday,May 18,2020 to consider a voluntary de-listing Proposal as they have received a letter from Vedanta Resources Ltd,London offering that the Promoter Group will buy out all the Public Shareholders who hold 169,10,90,351 Equity Shares aggregating to 48.94% of the paid-up equity share capital of the Company. This includes Equity Shares held by the Employee Trust but excludes 6,54,45,052 American Depository Shares against 26,17,80,208 number of underlying Equity Shares. Other than 2,48,23,177 ADS representing 9,92,92,708 equity shares which are held by one of the members of the Promoter Group, the remaining ADS are held by persons who would be considered to be Public Shareholders in the event they chose to convert the ADS into Equity Shares American Depository Shares  issued by the Company. Indicative Price given by them is Rs 87.50 per share.. Should all the outstanding ADS be converted into Equity Shares, the shareholding of the the Promoter Group will be 186,36,18,788 Equity Shares aggregating to 50.14% of the paid-up equity share capital of the Company Public Shareholders will be 185,35,77,851 Equity Shares aggregating to 49.86% of the paid-up equity share capital of the Company. The Meeting will take on record and review the due diligence report of the Merchant Banker in terms of Regulations 8(1A)(ii) and 8(1E) of the Delisting Regulations to approve/ reject the Delisting Proposal after taking into account various factors and the
    Merchant Banker’s due diligence report
  • Wednesday,May 13,2020 ~ Vedanta Ltd notifies the BSE & NSE of the appointment of SBI Capital Markets as the  Merchant Banker to do the due Diligence for the voluntary de-listing proposal    
  • Monday,May 18,2020 ~ Vedanta Ltd’s Board of Directors Meeting to take on record and review SBI Capital Markets due diligence report and accept or reject the voluntary de-listing proposal

What Haste ! ~ stinks of a foregone favourable conclusion in favor of promoters ! ~ this would mean SBI Capital Markets will have to submit it’s due diligence report inside just  five days for the Board to consider on Monday,May 18,2020 !~ Ridiculous ! ~given the constraints of the Covid-19 crisis lockdown how will they accomplish this given the restrictions ~ due diligence goes beyond reviewing just the documentation handed  by the company to them or whats’s available in the public domain ~ reminds me of the time the Deputy Director of the Company Law Board (CLB) had scathingly remarked at a CLB Hearing  in the Satyam & Maytas Properties  Scandal of a decade ago as to how could the leading audit firm E & Y could have done the Property Valuation of Rs 6523 crs in just one day !  You can read this amusing 2009 blogpost of mine here

Why is Rs 87.50 a ridiculously low indicative price to de-list

There are numerous arguments for this but what is most compelling and which amounts to significantly short changing the minority shareholders is the value of  Vedanta Ltd’s holding in listed Hindustan Zinc :

  • Vedanta Ltd   holds 64.92 %  or 274.31 cr shares of the Equity in the listed Hindustan Zinc in which the Government of India holds 29.58% stake
  • Hindustan Zinc closed at @ Rs 193 on BSE today at which Price the Market Capitalisation is @ Rs 81500 crs
  • Thus Vedanta Ltd’s share of this Market Cap is @ Rs 53000 crs which works out to Rs 142 per share of Vedanta Ltd’s Equity of Rs 372 crs of FV Rs 1
  • The Promoter Group holds around half of Vedanta Ltd and thus minority shareholders are entitled to half of Rs 53000 crs that’s Rs 26500  crs
  • By delisting at Rs 87.50  the Promoter Group would be expending just @ Rs 16500 crs for buying out the public shareholding that holds half of Vedanta Ltd
  • Imagine this scenario where they buy out shareholders of Vedanta at Rs 16500 crs and thus own 100% of Vedanta Ltd and thus are full ‘malik’ of the 64.92 % stake held by Vedanta Ltd in Hindustan Zinc that’s worth Rs 53000 Crs of which Rs 26500 crs would have actually belonged to the minority shareholders of Vedanta Ltd ! ~ this is thus a squeeze of Rs 10000  crs
  • Don’t give me this hogwash of holding company haircuts now  because when Promoter is planning to de-list they you need to give the full benefit as per market value too to the minority shareholders.This Rs 53000 crs share of Market Share in Hindustan Zinc works out to Rs 142 per share of Vedanta Ltd  
  • Hindustan Zinc has also just announced an interim dividend of Rs 16.50 per share for FY 20 that’s gone by which would mean Rs 4526 crs will be received by Vedanta Ltd for the 64.92 % stake or 274.31 cr shares it holds in Hindustan Zinc

Segment Performance of Vedanta Ltd for the nine months at December 31,2019 read more

Riskless Reliance Industries Rights Investment Strategy

This is a Riskless Reliance Industries Rights Investment Strategy for those over 2.3 Million Shareholders already holding RIL shares.

It is not a recommendation to buy RIL cum rights 

It’s a no brainer yet I’m just penning a brief note because some have told me they hold Reliance but are skipping the Rights !

Don’t !

I’ll keep this short without going into the fundamentals of RIL Operations and future which in itself is quite another story

Adopt this simple Riskless Rights Investment Strategy as below if you’re concerned about what the future holds for Reliance and don’t wish to increase exposure by increasing your holdings through the Rights Issue ….well,if you’re deeply concerned you should not have been holding Reliance in the first place

This Strategy will reduce your Holding Cost of existing RIL shares by replacing 1:15 of your holding with the Rights entitled shares at a much lower Rs 1257/share to currently traded prices(see below)

Chronology

  • April 27,2020 ~ RIL Board to consider Rights Issue  in their Meeting on April 30,2020 along with adoption of FY 20 Accounts and deciding on Dividend
  • April 30,2020 ~ RIL Board approves Rights Issue
  • May 9,2020 ~ RIL receives in principle approval from BSE & NSE for the Rights Issue and announces May 14,2020 as the Record Date for the Issue
  • Wednesday,May 13,2020 ~ RIL will trade ex-rights on the Exchanges
  • Thursday,May 14,2020 ~ Record Date to establish eligible shareholders for the Rights Issue
  • read more

    Yes Bank ~ Has the RBI & MOF lost it !?

    Yes Bank ~ Has the RBI & MOF lost it !? SEBI really is a bystander here

    Controversial Lock In Clause 3 Sub Clause 8 (a) in the Scheme of Reconstruction 

    No wonder the Finance Minister Mrs Nirmala Sitharaman, while highlighting only selected points, even when asked for details of the Scheme,did not want to say it at Friday,March 13,2020 evening press meet to announce cabinet decisions,one of which was the approval of RBI’s Scheme of Reconstruction for Yes Bank and that a notification would follow. A gazetted notification did follow  late same evening by the Department of Financial Services,Ministry of Finance and it’s available  on Yes Bank’s  website here and on egazette website  here 

    While I commend the Government on it’s promise to protect all depositors monies what caught my eye in it was this absolutely ridiculous clause 3, sub clause 8(a)  that essentially puts 75% of the shares held by existing investors in quarantine or lock in for three years too along with 75% of  the new shares to be allotted to State Bank of India and other Investors at Rs 10 which too will enjoy a capital tax gains exemption.Only small shareholders holding less than 100 shares will be exempted from this restriction.Here’s it verbatim :

    (8) There shall be a lock-in period of three years from the commencement of this Scheme to
    the extent of seventy-five per cent in respect of-
    (a) shares held by existing shareholders on the date of such commencement;
    (b) shares allotted to the investors under this Scheme:
    Provided that the said lock-in period shall not apply to any shareholder holding less
    than one hundred shares.

    Is this a joke !? but then it’s not April 1 yet !

    Is the Government protecting the minority shareholders or actually safeguarding the incoming Bank and other High Networth Investors who have committed to participate at just Rs 10 per share with capital gains tax exemption too in this Yes Bank Scheme of Reconstruction,2020 ? 

    Yes Bank too has notified the exchanges yesterday of the Scheme of Reconstruction highlighting the above lock in

    Yes Bank covered extensively in my Equity Workshops past two years

    For the past two Years most of the fundamental ‘Value vs Price’ equity workshops that I conducted showcased Yes Bank Case Study in detail and why though quite a few participants thought it looked great in 2019 at Rs 115 and then later even at Rs 80, why one should not be foolishly courageous as the true stress in Advances was clearly not visible and Networth could be wiped out on true provisioning . read more

    Boom!as FM Busts Corporate Tax!~Wow!How!Now!?

    Released today under my authorship in the SCRIP STANDPOINT Module of Jeena Scriptech Alpha Advisors Pvt Ltd  

    “How’s the Josh !?”

    Boom!as FM Busts Corporate Tax!~Wow!How!Now!?

    The effect of Fun & Excitement peaks when the cause is least expected

    Market Sentiment has reversed dramatically & instantaneously !  

    BSE & NSE  has seen the Sensex & Nifty created historic surges moving respectively 5.32% & 1921 points up to 38015 & 569 points to 11274 on Friday,September 20,2019 & even more by 2.83% to 39090 & 11600 on Monday ,September 23,2019 to aggregate a surge of 8.3% in just two trading days with Total Market Capitalisation zooming up in just these two trading days by Rs 10,45,700 crs or nearly US $ 150 Billion  to  Rs 148,87,830 crs or near US $ 2.1 Trillion ,thus regaining US $ 2 Trillion Capitalisation quickly ! 

    Date Sensex Close Up/(Down)  Points, % Approx Total Market Cap

    (Rs Crs)

    Total Market Cap Up (Down )

    Rs Crs, %

    Friday ,September 13,2019

    A Week Before

    37385 1,42,42,950
    Thursday,September 19,2019

    Day before Tax Rate  Game Changing Significant Slash Announcement

     

    36093 (1292), – 3.46 1,38,42,130 (4,00,820),  -2.8
    Friday,September 20,2019

    Morning of  FM’s Tax Rate  Game Changing Significant Slash Announcement

    38015 1922, 5.32 % 1,45,34,237 6,92,107,   5
    Monday,September 23,2019

    On Second Trading Day after  FM’s Tax Rate  Game Changing Significant Slash Announcement

    39090 1075, 2.83 %

    &

    2997 in two days, 8.3%

    1,48,87,830 3,53,593,   2.43

    &

    10,45,700,   7.56 

    Wow ! How !  Now ! ?

    It took a Government Sacrifice of  Rs 1,45,000 crs or US $ 20 Billion in Corporate Tax Revenues to create a 7x sacrifice surge in Market Cap of US $ 150 Billion in just two trading days !

    It’s like the Government conceding to the Corporate Sector ” Hey Guys ! we’re transferring our Revenues to you as you’ll can put it to more productive use by funding an Investment Capex Cycle to stimulate more growth for better returns than we can through increased Government Spending “

    What is clearly a Market Valuation Re-Rating Move,on the morning of Friday,September 19,2019 our FM Mrs Nirmala Sitharaman announced,what should be seen as a forced measure, a Tax Bonanza for Corporates busting the Tax Rate from an effective high of 34.94% for most to an effective 25.168% with no requirement for those who opt for this rate,  to pay the Minimum Alternate Tax which too was slashed to an effective 17% from  the current 18.5%.Another major tax incentive will be a Tax rate of just 15% for manufacturing companies incorporated after October 1,2019  & who commence manufacturing by March end 2023

    Such Tax Rate Cuts & Incentives  announcements should have been part of the budget in early July.If one recalls since the NDA came to power in 2014,it’s always been their stated intent to reduce the Corporate Tax Rates gradually to 25%.Economic slowdown is a catalyst to this ‘one shot’ reduction now & that’s why it can be viewed as a forced measure

    It’s a ‘No Brainer’ that Markets would instantly turn euphoric as back of envelopes calculations see the Nifty 50 Companies,whose aggregate FY 19 PAT was Rs 370000 crs , benefit by a clean Rs 27000 crs or US $ 3.8 billion in FY 20 on this Tax Rate reduction.Factor in Earnings Growth before Tax & the benefit is even higher  read more

    Shareholder Shenanigans ~ Hey Mister Aster whose Healthcare are you after !

    Shareholder Shenanigans ~ Hey Mister Aster whose Healthcare are you after !

    Invariably the Construction of  the Pre IPO Equity Capital of a Company  reveals the Fairness & Character & Mindset of Promoters & other Equity Stakeholders in it & extent of any obscene premium seduction if any 

    What can we infer from a Company  :

    • that issues further shares end December 2011 at Rs 10,000 to an existing Private Equity (PE) Stakeholder Player 1   from 2008 which takes their total Equity Investment in the Company to just over Rs 22 crs & just 20 days later in January 2012 ,this PE Player 1 sells just @ 30.8% of  it’s Equity stake for Rs 110 crs ! to a new incoming PE Equity Player 2 at Rs 1,58,918 per share ~that’s 1500% & 15 times over latest unit share cost of Rs 10000 ! Thus it recovers 4 times it’s aggregate Investment in literally no time  & yet continues to hold a good stake in the Company which it has just sold for Rs 120 to get a huge Rs 554 crs    
    • that issues two liberal back to back Bonus issues of 1000:1  in 2012 & 2: 1 in 2013 from the Share Premium paid by incoming PE Player 2 in 2012 when it invested Rs 504 crs in the Company through Rs 394 crs new issue by the company & Rs 110 crs purchase from PE Player 1 as stated above  
    • where Promoters transfer shares in December 2017 at just Rs 22.14 per share just two months before February 2018 IPO at Rs 190 to PE Player 2 referring to a costing methodology of a Shareholder Purchase Agreement (SPA) of May 2014 when this PE Player 2 had invested further in May 2014 itself directly in a fresh issue by the Company at Rs 102.85 & on same day as per same SPA even picked up shares from Promoters at Rs 189.46.Even CCCP’s issued were converted at Rs 111.65 in November 2017,three months before the Rs 190 IPO.An SPA that spells out a costing method that works out to a much lower throwaway price of just Rs 22.14 per share three & a half years down the road in December 2017 will indeed raise an eyebrow.A lower price would imply growth parameters have not resulted as envisaged.Why  price the IPO at Rs 190 ? Should have been at Rs 22,I daresay !        

    If Memory serves me right,the Financial Year 2011-12 was perhaps the last year before Income Tax & Company Act restrictions came into force on the issue of Shares at unjustified & obscene premiums….nevertheless

    Such Modus Operandi was quite prevalent in Companies to infuse huge funds into Equity at bizarre premiums not in sync with Valuation which would facilitate insignificant Equity Dilution which otherwise would have impacted Promoter & Other existing  Shareholders Stakes.This invariably was followed up with bizarre Bonus Issues which while maintaining the Equity Stakes of all served largely to considerably lower per share holding cost of Shareholders that had infused such Equity Capital at obscene Premiums….daresay some indulged in this even for laundering or accepting white bribes

    Two recent events drew me to  checking out Aster DM Healthcare @ Rs 127

    1~ First when observed huge Market Deals being executed end of last month on June 26 & 27, 2019 at Rs 120 with Private Equity Shareholder True North Fund III A  ( earlier called India Value Fund (IVF) ) offloading it’s full 9.15% stake of 4.62 cr shares to a host of Big names that included Fidelity,Tata AIG Insurance A/c Wholelife Midcap Equity,HDFC Small Cap Fund,Ontario Pension & Steinberg

    2 ~Was not impressed at this first quick look on performance & prospects & was letting go when a Stock Channel carried an interview of it’s Promoter & ED & Chairperson Mr Azad Moopen on July 12,2019.

    Intrigued me to have a re-look as Mr Moopen stated verbatim these two threads  :

    • “we think  that this is a very low price for this stock “ ~ on Share Price of @ Rs 121/122 as on July 12,2019 & on bulk deal price of Rs 120 end June 2019 when PE Player True North Fund III exited ~ is not there some restriction on Company promoters and management making such views public on Share Price ?
    • “extremely useful in the initial phase” ” significant value addition to the company”  ” True North has been a great strength ” ” no way they could hold on beyond 9 to 10 years” ~ on Private Equity Player, True North Fund III A who had initiated a stake in 2008 in Aster & who exited last month in June 2019

    I looked at the IPO Prospectus that announced Aster DM Healthcare’s February 2018  IPO eighteen months ago at Rs 190,a pricing that’s 33% higher than today’s Rs 127

    While I appreciate Mr Moopen’s honourable healthcare venture in the last three decades what caught my attention,as it usually does,was the not so honourable Construction of the pre IPO Equity Capital

    Here are some interesting extracts & derived data  on the constructions of holdings of PE Player 1  True North &  PE Player 2 Olympus Capital Asia Investments in Aster DM Healthcare Limited.The Post IPO Equity Issue stands at Rs 505.23 crs with  50,52,27,345 shares of FV Rs 10 . read more

    Valuation!Valuation!Valuation!~Lovely Interactive Equity Workshop

    Fabulous Participants & Fabulous Interaction at the Equity Workshop
    Fabulous Participants & Fabulous Interaction at the Equity Workshop

    It was quite an interactive Saturday at the Full House Fundamental Equity Value Vs Price Mumbai MasterClass on Compounding & Capital Protection

    We began in earnest at 9.30 am right through to 8 pm~ so much debated from current unnerving market meltdowns & what should be mindsets & strategies in such times that suddenly overcast us in September ~ of Courage & Conviction & Cash ~ what if one is fully Invested ? should one average? should one exit ? why in panic one tends to always sell off the winners to realise whatever profit in hand & let’ losers drag? ….lot’s of questions that were addressed with a confidence culled from such experiences in the past thirty years

    They came from all around ~ rookies to veterans ~ small to High Net Worth ~ from Broking Houses,J P Morgan,Accenture,Abu Dhabi Commercial Bank,Cap Gemini,Reliance,Moneycontrol etc

    We covered Time Value,Volatility,Valuation & Asset Allocation with Illustrations of over 25 companies with few of them in detailed Valuation over Earnings & Assets & Challenges faced…went through a few Annual Reports & Interim Results & Exchange Notifications & Developments through News in the Media…checked price trends in the short term & even over last ten years to assess Risk & Reward  & Mispricing Opportunities

    How the discipline of Valuation & Asset Allocation is your Weapon for Survival & Wealth Protection while growing it & to stay away from Noise & Insider trading & from those who know nothing or even more dangerous from those who don’t know they know nothing !

    Valuation ! Valuation ! Valuation ! …how this leg of the equity table actually must be the most solid to hold the table together when the other leg of Liquidity  props up the remaining two legs of Sentiment & Momentum ~ Impact & Quantum of  FPI & DII Flows especially when they slow down or reverse

    Put up Friday,September 28,2018 closing prices touchlines of over 200 scrips & even those separately in the Finance,Pharma & Realty Space showing the wealth destruction in them from their 52 week Highs….alarming yes,but is there value re-emerging in many? ~ Showcased a Core Scrips Valuation Grid too

    In this continuing market meltdown across the board that has knocked off 50% & more in many that actually hold wealth creation potential & in many that simply were wealth destroyers in the making & should never have been married to ,who can one trust for relevant,reliable & timely information & unbiased & wise interpretation ? ~ Government,Exchanges & Regulatory authorities,Bankers, Auditors,Media,Brokers,Experts,Promoters & Fund Managers of PMS & MFs,Company Promoters & Management ? Who ? read more