- May 14, 2020
- Posted by: Umesh Paliwal
- Category: Blog
Vedanta delisting Procedure
1. The meeting for deciding the delisting process as per SEBI regulations will be held on 18.05.2020.
2. For the delisting of shares, a special resolution will be passed for shareholders’ approval.
3. Then voting will be done for approval or rejection of the delisting of Vedanta- However, delisting is bound to be successful as Vedanta promoters hold more than 50% share.
4. Once voting is successful, an offer letter will be dispatched to all shareholders containing the following details.
a) Floor price– a minimum price above which shareholders can place a bid. The shareholders can place a bid at any price above the floor price. The bids will be placed under the reverse book building process.
b) 7 days window will be opened for shareholders to bid.
Now how to decide the exit price
Let us understand it.
Discovered price – In the reverse book building, all the public shareholders will put their bids. The promoters will keep on acquiring shares and the price at which the shareholding of promoter’s group reaches 90% will be called as discovered price.
Now, promoters in their sole discretion may accept this price. Once they accept the discovered price, all the shareholders will be given an exit at discovered price and that price then finally be called Exit price.
So, in short, the delisting to be successful the promoters need 90% of total shares in the company.
Shareholding as on 31.03.2020.
1. Promoters- 50.14%
2. Public – 49.48%.
a) MF- 33.97%
b) Retail – 7.26%
c) HNIs- 0.28%
d) Foreign Investor- 15.15%.
Conclusion:
As we discussed above, for this delisting to be successful the promoters need 90% of shares in their hand. If you see the shareholding carefully, ~33% of shares are held by MF and ~15% are in the hand of Foreign investors. So the onus to reject and accept this delisting is now on in the hands of MF and Foreign investors.
Will they accept Rs. 87, the answer is big No!!
So as an investor you should not be worried.
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Vedanta Resources raising $2.5b to fund delisting
Anil Agarwal-controlled Vedanta Resources raising up to $2.5 billion in short-term loans from global banks such as JP Morgan, Barclays to finance the buyout of Vedanta’s public ownership ahead of the stock’s proposed delisting:
Source: ET
Board approves delisting of Vedanta.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/e8d85371-ab1b-4213-8255-020c02cf8136.pdf
At CMP of 90, the Valuation of Vedanta is Rs. ~ 34000 Cr. As we see the company is willing to delist the share from NSE and BSE at price around 90, so is this price justifiable?
If you see the Balance Sheet of Vedanta as on 31.03.2019, it is holding a lot of investments in listed and unlisted companies. One of the biggest investments is Hindustan Zinc. Let us see the valuation of Hindustan Zinc and how much value Vedanta holds as an investment.
Total shares outstanding of Hindustan Zinc are ~ 422 Cr and total Valuation is ~ 78000 Cr.
Vedanta holds ~ 274 Cr shares of Hindustan Zinc. The total valuation of Hindustan Zinc investment is itself is ~ 50000 Cr.
Total shares outstanding for Vedanta as of 31.03.2019 are 372 Cr.
50000/372= Rs. 134 per share.
So, under Vedanta, Hindustan Zinc alone has a value of Rs. 134 per share…
Nobody will take a value less than 200 for delisting.
@Market Wizard, does this mean we can safely buy Vedanta now at 90? If the implicit value is at least 134, then is this a safe investment at this time?
The reason I am doubtful is because even before the corona impact, it was trading only around 150.
It is the just the intrinsic value I have calculated of Hindustan Zinc available for Vedanta shareholders. It is generally realized when company demerge Hindustan Zinc business, which is not happening anytime soon.
But having said that, the price of 90 is somewhat has become base if anyone wants to make entry.