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