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

    Looooooooong Full House Saturday Equity Mumbai Workshop Sept 14 2019

    It was a looooooooong,should have held it over two days,  Full House Equity Workshop in Mumbai on Saturday,September 14,2019 with a whole spectrum of smart participants that made for really invigorating interaction ~they came from Mumbai,Gurgaon & Pune ~ from young upwardly mobile grads & post grads from top ranked Management Institutes in India,UK (London) & USA(Harvard) to ‘ well tuned in’ professionals from the IT ,Consultancy,Broking,Corporate & Banking Sectors to veteran high networth investors . We commenced at 9.30 am & concluded well beyond 7.30 pm ~ 🙂 should have arranged dinner too

    Thank you Guys !

    Here are a few candid clicks from the Workshop :

    The Coverage was expansive & the Interaction from Participants very intelligent & which opened out many threads that we examined with anecdotal support . When analysing a company ,they asked what is “Non Negotiable” &  “How to have Foresight as on Hindsight we are always right”

    Really a lot was covered ,some of which is below  :

    • Macros through :
    1. Examining the Equity Table’s four legs of Valuation,Liquidity,Momentum & Sentiment & the Impact of FPI Flows ~ when Valuation,which should be the strongest leg,sometimes takes a back seat as Liquidity or even a lack of it drives the momentum & sentiment
    2.  Not getting Seduced by any Bounce at  Friday closing Sensex 37385 & Nifty 11076 Levels as Caution is strongly indicated by domestic & overseas economy & geo-political headwinds
    3. Negative Interest Rates Era vs the Magic of Compounding in such meltdowns
    4. Sensex & Earnings & Market Cap & low GDP growth Dynamics on Levels & Valuations ~ Past,Present & Forward & why downside risk remains wide open while the upside appears capped for now ~ we referred to 1991/92 abnormally high Sensex PE pre Harshad Mehta Scam exposure & the High PE in 2000 with Ketan Parekh was in action & where the markets were clearing running ahead of fundamentals by huge margins~ we referred to the Sensex PE of just 6 in the late 1980s when VP Singh was the PM 1988~ we covered Mkt Cap/GDP Highs pre Lehman collapse in 2007/8 & the levels now
    5. Fx Reserves  & Exchange Rate Risk &  the Risk of increasing Sovereign Debt as planned by Government ~ How our Rupee has always had a South trajectory,except when it soared from Rs 49 to the US $ to Rs 39 to the US $ creating havoc especially in the Diamond Sector
    6. Why Inversely co-related Gold & US $ are moving up together instead
    7. Turm-Oil & Impact on Fiscal Deficit & Rupee  like last happened in 2007/8( On Saturday at the workshop we were not yet clued in to the Drone Attack on the Oil Refinery in Saudi Arabia that saw Oil Prices dangerously soar 20% in spot) ~ India is hugely dependent on Oil Imports
    8. Interest & Inflation rates
    9. Trump ~ Not sure if he’s a macro or micro factor !
    • Micros through many companies  & sector dynamics covering :
    1. Checklist on how to Smartly & Effectively & thus Quickly Read a voluminous Annual Report
    2. Our Five Steps for Evaluating a Company for Investment
    3. Impact on the Financial Statements in Scenarios like Buy Back,Rights Issues,Fictitious Sales,RBI issuing a divergence on Provisioning for NPAs,non linear jump in Sales Realisations,5 G Spectrum Fees,Permanent Diminution in Investments,Monetising Assets & Depreciation of the Rupee
    4. Quick Brief on Absolute & Relative Valuation & how to prepare a quick Valuation Grid from the Annual Report, Market Price Trends & Shareholding
    5. Why Liquidity more than Profitability is the ‘Circle of Life’  for a Company as viewed through the lens of the Cash Flow Statement dervived from the Balance Sheet & Profit & Loss Ac & that distinguishes operating,financing & investing flows
    6. Corporate Governance Issues on inadequate Disclosure or Non Disclosure, Incorrect & questionable Accounting Treatment & Lack of Transparency &  irresponsible (deliberate?)  Management utterances  that give a leg to Insider Trading & huge Profits through  Derivatives Play
    7. Courage & Conviction Promoter or Institutional recent Buying in Vodafone,Yes Bank,I B Real Estate & Tata Motors & seeing more wealth destruction since in these   
    8. Basis for Disclaimer of Opinion by the Auditor of Reliance Infrastructure & what holds out some hope
    9. Intangibles,Investments & Impairments
    10. Reliance Industries’s Enterprise Value,Revenue Segments Potential,Spin offs of the Jio Telecom Infra into two trusts, Aramco’s 20% stake being negotiated in the Refining,Petroleum Retailing & Petrochemicals Business that should lead to further demerger & reviving & scaling the Gas Exploration Operations
    11. How Defaults & Corporate Governance Issues decimated into or near oblivion Eros,Cox & Kings,ManPasand,Tree House Education,Satyam,Jet Airways,Kingfisher & Talwalkars & is there any hope of operational & share price recovery with Asset values holding out some hope in a few ~ How Clearly the Statutory Auditors & Credit Rating Agencies were negligent or intentionally turned a blind eye in many cases
    12. Huge Potential Outlay of the ‘Nal sey Jal’ Scheme of the Government & the new Jal Shakti Ministry focus that should benefit many companies if the implementation & execution is as noteworthy as the intent
    13. How IndAs 115 continues to affect Bombay Dyeing
    14. How Exchanges continue to accept outright untrue or tepid clarifications from Companies
    15. Reference to Investment Gurus & Living Legends Warren Buffett & Peter Lynch Approaches & Success
    16.  Coverage of a few sectors like Defence, Hydrocarbons,Broking,Telecom,Real Estate,NBFCs,Banks & Automobiles & Disruption that’s in play in many
    17. Consolidation & Capitalisation of PSU Banks & the controversial Acquisition of Laxmi Vilas Bank by I B Housing Finance pending RBI approval
    18. Common Investor Mistakes

    The next Equity Workshop is scheduled  pre-Diwali for Saturday ,October 19,2019 & will be announced soon on www.jsalphaa.com & social media

    Touched by some warm & constructive feedback from participants :

    • thanks for a lovely interactive session…”
    • “enjoyed your session yday”
    • “it was great to meet again & reskill to be better prepared for opportunities which would arise”
    • “Thanks for being the Enabler,the last few days have been very encouraging”
    • “Cover the Scenarios Exercise more with Investor focus than just on Accounting Impact & take in a few Annual Reports before Lunch”  

    😆 & I swear I did not pay for these ones !

  • ” You are very good at what you do,comes naturally to you,with a vastness of the subject to cover you did justice to cover the best you could with your insights and experience of all the treasures of knowledge,you are an encyclopedia of the subject with case studies,which is the best way of teaching, sharing & learning according to me,the various industries that you know of,the processes & the products,the promoters & the pitfalls,the auditors & the audited,you can understand in the readings the stated & the unstated,intention & intended,you truly personify_the integration of intellect with instinct_”   
  • “Whoever missed this one, missed learning a radical way to look at balance sheets. Very practically in a few minutes you can strip away the padding and bullshit that promoters hide their sins behind. If the stock market’s motto or rather rider has always been caveat emptor or buyer beware, Gaurav’s lessons in Analysis would ensure that a “fool and his money are not soon parted” for when emotions like fear and greed coupled with ignorance seize us even the wisest are prone to behave like fools. Especially the wisest!”
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    Wealth Destroyers as Potential Multibaggers~ Mumbai Equity Workshop Sat June 17 2017

    Wealth Destroyers as Potential Multibaggers~ Announcing a Full Day Mumbai Fundamental Equity Workshop on Saturday, June 17 2017 

    🙂 This time in this Stock Selection ~Value Vs Price Workshop have kept an exciting Theme :

    WEALTH DESTROYERS : POTENTIAL MULTIGAGGERS

    As Limited Seats would advice to Book Your Seat right away here => http://www.jsalphaa.com/register.php

    Plan to cover over 25 Wealth Destroyers to assess any Turnaround Value vs Price & thus a chance to redeem themselves and become Wealth Creators from here… or should just one move on in many of such Wealth Destroyers that are now beyond redemption

    Here’s what some participants said of the December 2016 Mumbai Fundamental Workshop on Stock Selection : Value Vs Price…and this was before IB Ventures zoomed 7 x in months from Rs 20 to Rs 140 & HOV doubled in the same time to cross Rs 300… we had covered both these & more in Earnings & Asset Basis Valuation exercises

    “Amazing… Awesome Session about Fundamental Stock Selection & Wealth Creation ”

    “Full of Inspiration, filled with wisdom…. am really proud to be a part of this wonderful session”

     & from a repeat participant “recreated the same old magic of Bangalore in Mumbai… great Saturday”  

    Would love to interact with you ~ So do invest one Saturday ,June 17, 2017 with me in my Mumbai Fort Office near BSE and above Starbucks & Croma

    Register here => http://www.jsalphaa.com/register.php

    Here’s the Detailed Template of this Workshop if you want more details on coverage

    gap-master-class-mumbai-17june2017

    🙂 See you Saturday, June 17, 2017 at my Mumbai Fort Office Conference Room… we’ll figure out if Suzlon will continue to be ZZZZZlon!  & dissect many such Wealth Destroyers!

    Cheers !

    Jio ! Reliance ! Jio! @ Rs 1000

    Reliance Underperformance
    Reliance Underperformance

    Over 2.6 million shareholders retain faith in Reliance Industries despite the clear underperformance  over the years

    Tum ‘Jio’ hazaron saal,hazaron kay aar paar ?  🙂

    Sensex disappoints in FY 16 as many of the 30 constituents lose big value

    FY 16 has been a mixed year for Stocks with Markets on a downward drift  with  Sensex closing 9.4% lower  at 25341

    Sensex disappoints in FY 16 as many of the 30 constituents lose big value 

    Interesting & Heartening to it’s Shareholders ,Reliance has been the biggest constituent gainer at @ 27% while at the other end BHEL has lost half it’s value at 51% !  ~ another 11 companies have lost between @ 19% to 30 % values

    Domestic Concerns revolved around  second consecutive failure of monsoon in 2015 &  slow pace of Reforms  & Corporate Earnings Lethargy with growth in single digits despite boasts of GDP Growth of over 7% and lower Inflation and Oil Price falling 40%

    Global Concerns revolved around  China’s Growth slowing down considerably & It’s Stock Markets losing a lot of it’s froth in panic falls, continuing recession in Europe & expectations of the US Fed raising rate

    Consequently FPI Inflows which were a record US $ 17 b in FY 2015, reversed to outflows of US 2.1 b in FY 16.These outflows would have been higher if last month March 2016  had not seen a reversal back to FPI Inflows of US $ 3.2 b 

    In the first three months of this Calendar Year 2016 , January &  February 2016 witnessed significant outflows of US 1.67 b & US $0.8 b respectively that dropped Sensex to 23000 levels.On the back of many countries like Japan,Switzerland and Sweden embarking on Negative Interest Rate Policy,the  US Fed send out dovish signals and has delayed Rate hikes.This saw FPI Equity Inflows smartly cross US $ 3 b in  March 2016  getting them back into the Green in 2016 & revive the Sensex back up @ 10% to 25500 levels or else FY 16 would have seen a Sensex drop of nearly 5000 points & @ 18%,double than what it actually did in the end

    Here are some FY 16 Trend observations :

  • Sensex closed down 9.4%.It was down @ 18 % just around a month ago but smartly pulled back on record US $ 3b FPI Inflows in March 2016
  • Of the 30 Sensex Constituents,amusingly after a seven year itch perhaps 🙂  Reliance is the biggest gainer  at 27% taking it’s Market Cap to US $ 49 b,next only to top TCS  which  despite a flat year retains Top Market Cap of US $ 73b !
  • Six Scrips,including all weather favourite TCS (Market Cap US $ 73b) have remained flat
  • Of the Four Banks,only HDFC Bank stays in the Green just about,the rest have lost lot of value from one third to one fifth
  • India Growth Proxy Larsen & Toubro has lost 26% Value
  • Four Pharma Majors have also dropped significantly from 13% to 28%
  •  Three IT Bellweathers saw Wipro down 10%,Infy up 10% and TCS  in between remaining flat
  • Of the Five Auto Majors,the two 2-wheelers are both in the green,two ,Maruti & M & M are flat while Tata Motors has lost 30% value
  •  Three eternal FMCG Favorites,ITC,Asian Paints & HUL have held up
  •    After a Steel Sector Battering past few years,Tata Steel is now catching it’s breath
  • All  Five  Non Bank PSUs continue to flounder ~ BHEL has lost half it’s Value follwed by ONGC down 30% ,Coal India down 19%,NTPC down 13% & Gail down 8%
  • Housing Finance Leader HDFC too has taken a beating of @ 16%
  • Controversial Adani Group’s Adani Ports is down 20%
  • Telecom Leader Bharti Airtel is down 11% despite getting a 4G breather as Reliance’s Jio ,expected to be a sector disruptive force,launch continues to be delayed but should be fully operative by FY 17 year end
  • read more