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Sterlite Technologies (STL) Shareholders short circuited in the Demerger ! ?
I was approached to buy some unlisted shares of Sterlite Power Transmission Ltd (SPTL) & then was astounded when told an offer had already come in for Rs 270 already !
So what’s the Big Issue ? ~ How Can the Value of unlisted SPTL change dramatically upward by over 300% from Rs 112.30( as on March 31,2015 cut off date) that the company offered for in the demerger of STL and paid in August 2016 & just eight months later value the same atR s 464.46 ! on March 2,2017 when they announced an EGM for March 29,2017 to issue new shares !(Details Below)
It’s thus to do with the low Valuation of unlisted SPTL as on cut off date March 31,2015 that was the subsidiary of listed STL that got the Power Division of STL in the Demerger & then ceased to be a subsidiary post demerger.
Haribhakti & Co LLC did the valuation on a NAV (for Holding Co) & Income DCF Approach (for Operations) at a maximum of Rs 111.50 /share.Price Waterhouse & Co LLC also used similar Valuation approach and got mariginally higher Maximum Valuation of Rs 112.30.Both had valued SPTL below Rs 900 crs only ! despite Income Approach having to consider Potential of Scale Operations in coming years.Both Valuation Reports are dated May 18,2015 in sync with STL Board Meeting Date as below.STL has gone with PWC
These are the relevant Dates & all relevant documents for Shareholder/Court/Exchanges Permissions & Approvals can be found here :
May 18,2015 ~ Board of STL in a corporate restructuring decision approves the Scheme of Arrangement between the Demerged Company STL & Resulting Company SPTL (then subsidiary of STL)effective date April 1,2015.Decides to keep SPTL unlisted unlike the Adani Group that listed Adani Transmission after their restructuring exercise
December 15,2015~ Court Convened Meeting of STL Shareholders passes the Scheme
April 22,2016 ~ Mumbai High Court issues an Order approving the Scheme
May 23,2016 ~ Order becomes effective on date of filing with Registrar of Companies
June 15 & 16,2016 ~ STL begins ex demerger quote on June 15,2016 as Company has set June 16,2016 as record date for STL shareholders entitled to receive Demerger benefits of SPTL.SPTL ceased to be a subsidiary of STL on this Demerger & it was decided to keep it unlisted unlike the Adani Group which demerged & listed Adani Transmission.
June 27, 2016 to August 8,2016 ~ Election Date Range for @ 122000 shareholders in STL up from under 120000 shareholders at June 30,2015 when the Demerger plans were announced in May 2015 and I wrote a detailed blogpost in July 2015 (see later below) .There were two options for Resident Shareholders ~ receive Equity Shares of SPTL at Rs 112.30 (FV Rs 2) in a 1: 5 ratio for shares held in STL or go for the 8% Preference reedeemable shares of Rs 112.30 in the same 1: 5 ratio that would be reedeemed at Rs 125.55 in eighteen months from allottment.FPI/FIIs?Non Resident shareholders had to sell their shares back to the Promoters or their affiliates.