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Covered by Outlook Business for frowning on Essar Oil Delisting

A very well written article on the Essar Oil Delisting Proposal in the latest edition of August 8,2014 of Outlook Business has covered my frowning on it …they use the word ‘fumes’ though….maybe I did sound aggressive  when the young author of this coverage Twesh Mishra had connected with me after reading my recent blog a month ago on the same as below

LIC will never go Public & Essar Oil wants to go Private ! ~ What is the Connection !?

Saturday, June 21st, 2014

 

LIC will never go Public & Essar Oil wants to go Private ! ~ What is the Connection !?

LIC will never go Public & Essar Oil wants to go Private ! ~ What is the Connection !?

Corporate Governance….rather the lack of it !

In January 2010 LIC picked up a huge Equity Stake in Essar Oil from Matterhorn in a NSE Deal

LIC picked up 2.21 cr shares or 1.83% Equity Stake in Essar Oil at Rs 140 in a Rs 309 cr Block Deal on NSE on January 22,2010

I had blogged on this LIC Deal too on January 25,2010

Shareholding Pattern reported by Essar Oil right from March 31, 2010 to the Exchanges does not show LIC as a Public Shareholder with a stake of 1% and above !

And is this how LIC ,apart from supporting the Government sell offs,goes about it’s Investments in Non Government listed companies too  and expends Rs 309 crs of our Premium Monies !!! ?

If LIC is privatised or comes out with an IPO  and yet remains a  Government Entity in substance if not in form,the standard of Corporate Governance will be challenged ferociously with Shareholders demanding more accountability,transparency and disclosures…rationale of such deals will then be a matter for open criticism,accusation,suspicion and debate

Will they let LIC ever go Public ! ? Nah ! Too many Skeletons !….I daresay it’s like  a Parking Lot…actually a Car Dump…or should I say Shares Dump !

….and LIC Chairman S K Roy reportedly has strongly conveyed to the Finance Minister why LIC should not be listed !

Have a Look !…the share Price of Essar Oil has never really again touched LIC Purchase Price of Rs 140  in the last four years and five months to date since their investment except for a brief few days in January & April of 2011  !…This is on BSE…Share Price is in Rs

Year

Open

High

Low

Close

2010

140.60

162.45

115.05

137.70

2011

138.50

147.80

45.10

50.10

2012

50.70

73.75

44.80

70.25

2013

70.95

96.15

46.05

54.50

2014

54.40

119.30

44.50

108.40

….The High of Rs 162 was reached earlier in the month than the LIC  Deal on January 22, 2010 and some price range stability and even marginal buoyancy was seen till mid 2011…and it’s been dropping since to a low of even Rs 44.50 this year in 2014….It closed the Month below or around Rs 50 in January to March 2014 this year…April 2014 saw a closing of Rs 60 before May 2014 took it away higher to Rs 90…It now is Rs 108.40 as on Friday June 20,2014

Strong Delisting Moves have obviously been known to Insiders from May 2014 and the Price has since moved past Rs 100 to close Friday at Rs 108.40 on BSE

Funny really…actually not so funny really !….that the Company responded just a month ago on May 21,2014 to a BSE query on whether there was substance to the ‘Essar Group Companies to Consider Delisting’ Coverage that a Stock Channel had broadcast….The Company clarified to BSE  that they had not received any communication/proposal from the promoters of their intention to delist   …..why could not BSE & NSE have followed up or drafted the query to cover all delisting awareness angles !? Of course they had not received this…it came later (see below)…but surely they knew !….how else did the Stock Channel know !? read more

Two Interesting Bulk Buys…Essar Oil by LIC at Rs 140 and S Kumars by Merrill Lynch at Rs 47.60

Among the Bulk Deals that took place last week,two interesting purchases caught my eye…..even though I’m not a great Fan of the Ruias (Essar Oil) or the Kasliwals (S Kumars)…both gravely let down shareholders and other Stakeholders in the 1990s and even into the 21st Century…there were several Corporate Governance Issues too 

  • 20 Million Shares of ESSAR OIL (currently Rs 141/142) were picked up by LIC at Rs 140 on January 22,2010 in a Rs 280 crs deal….seller was Matterhorn

and

  • 1.375 Million Shares of S KUMARS NATIONWIDE (currently at Rs 45) were picked up by MERRILL LYNCH CAPITAL MARKETS ESPANA at Rs 47.60 on January 20,2010 in a Rs 6.55 crs deal

S Kumars is already one of our second half 2009 SS 2 Recommendations

Essar Oil was spotted by us as a SS 3 Multibagger at Rs 4/5 in 2003/4…Over the past 6 years Essar Oil has reached the following Highs….it taught us a lesson though…If you have caught it early,Do not Sell too Early,even if you see 200% Appreciation in the same year…that would be Rs 5 to Rs 15 ! in 2004………If your’e catching a Train from Mumbai Central to Ahmedabad,do not get off at Borivali !…..Stay with a good scrip which has good to great potential  for the long term over many years and it will give you quantum appreciation…Selling off in 2004/5/6 would have given strong % returns…but not as strong as from 2007 !,even considering the decline in 2008 and 2009 

Year…….High……..Absolute % Appreciation from 2003/4 at Rs 5…..In Number of Years

2004…….33……..560 %……One Year

2005……..48…….860 % ……Two Years

2006……..80……..1500%…..Three Years

2007……..333……6560 %…..Four Years

2008……..380……7500 %…..Five Years

2009……..194……3780%……Six Years

2010 till date….162…..3140%…..Six + Years

Clearly 2007 was a spectacular Year for Essar Oil when from an earlier Year 2006 High of Rs 80 it zoomed 316 % from this High to a New High of Rs 333 in 2007 

Watch out for both these Scrips in 2010

Cheers !

Watch out for India Securities at Rs 25…Essar Group reviving their Sick NBFC

The beleagured Essar Group Company,India Securities Limited (ISL) is poised to revive

The Ruias are bringing in equity at Rs 70/share to bail ISL out.ISL has an accumulated loss of Rs 28 crs

There will be a demerger in ISL where the Investment Division will be spun off to another Listed Company Essar Securities limited (ESL).ISL will continue to carry out NBFC Activities

Post Demerger the Networth of ISL will be Rs 31 crs with the Ruias holding 73% stake after infusing Rs 28 crores through  40 lakh shares at Rs 70.ISL currently has a capital of Rs 26.5 crs with the promoters holding a 66% stake

ISL has convened a meeting on August 11,2008 to approve the demerger.The Capital will be reduced by 40% and an equivalent stake will be given to the Shareholders in ESL which will get automatically listed after the demerger.The Demerger plan has been approved by BSE

ISL close up on upper circuit of 5% at Rs 25.55 today with over 50000 share buyers but the actual volume was just 266 shares on the BSE  

The Ruias are now worth billions of dollars with their forays in Telecom(in private capacity),Oil and Steel bearing rich fruit…albeit at the cost of many shareholders

ISL is poised to revive big time in the next few months

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

Mumbai Equity Workshop Sat June 22 2019 ~ Sensex at 40000 ~ Treasures & Traps

The last Seven Workshops have seen a Full House  & great interaction 

Here’s another lovely Opportunity 

Register for the Workshop here 

Saturday, June 22, 2019

Fundamental Equity Workshop in Mumbai
Stock Selection ~ Value Vs Price
Indian Equity ~ Sensex at 40,000 ~ Treasures & Traps

Limited Seats – Single Registration at Rs 12,000 ~ Group Registration of 3 or more at Rs 10,200 each

Save this Date & register for  another great opportunity to interact for a full Saturday ~ You can even request coverage of any particular company or companies when you register

Trapped in Scrips that have destroyed wealth  ? ~ Want to develop foresight in avoiding such Value Traps by identifying Red Flags before hand from Corporate Governance Issues & Financial Statements & other coverage in Annual Reports ?

How to position the Equity portfolio with Sensex at record 40000 ~ Do Valuations look stretched in the short term ?

How to protect Wealth while creating it in Direct Equity? ~ Need  Conviction to Invest in Direct Equity ?

We shall be addressing these & many more concerns  at this Mumbai Workshop  

Look forward to seeing you at the Workshop

Any Queries or need guidance call me on +91-9820162597 or on + 91-22-42304140 or email me at [email protected]

Cheers,

Gaurav

 

Gaurav A Parikh

Workshop Conceptualised & Conducted by

GAURAV A PARIKH

Treasures & Traps ~ Rewards & Risks ~ Clearly this is the moot mindset focus currently with Sensex & Nifty recording all time highs of 40000 & 12000 respectively driven by a handful of high index weightage core stocks on the second TsuNaMo election wave in five years.

Gaurav A ParikhCapital Protection  is a ‘must have’  Mindset  at all times for serious Wealth Creation through Equity.While Growing your Wealth it’s equally imperative to Protect it.

One way to do so is to develop fundamental conviction & foresight to consciously avoid ‘Value Traps’ like Suzlon & Subex & PC Jewellers & Manpasand Beverages & Vakrangee & not be seduced or influenced by those who peddle such on social & print media & stock channels.

In such record bullish momentum on the Sensitive Indices it is FOMO or the Fear of Missing Out that is the biggest seducer as many influencing voices call  these  or near these record levels as the new bottom on the Sensitive Indices.

This Workshop will equip you to deal with these questions :

  • How to assess the capacity & the willingness to assume Equity Risk?
  • How to Fundamentally Value & Select & Weight the Companies in a Portfolio ?
  • How do Company Valuations rack up against their Share Price now? ~ If there is Value, where can we find it as we negotiate these bullish markets which heightens the risk of more & more ‘Value Traps’ emerging
  • How should one read & interpret News & Views in the Print & Social Media & on Stock Portals & Channels ?
  • What are the red flags one should look for in an Annual Report ?
  • How much of such Interpretation & Valuation is already reflected in the Share Price ?
  • Where can we pin down Certainty in the Uncertainty in Equity Markets ?
  • How to strengthen resolve & conviction to hold on to Selections even when facing unrealized losses?
  • When & How to decide a Switch in Equity Holdings?
  • How not to let Emotion & Ego dictate holding on to Losers & Wealth Destroyers & just letting them go or avoiding them in the first place?

Invest a Saturday with Gaurav to discuss & debate all the above & more & to appreciate that Wealth of Mind & Monies must Move in Tandem & fundamentally assess Macros & Micros. read more

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