Delisting Plan of Vedanta Ltd- Update

Vedanta Ltd’s announcement of delisting plan of equity shares continues to grab the attention of  entire Indian  equity investors, apart from its own share holders. Initially it was on account of the low offer price decided by the company against the perceived value of the share. The delisting plan of Vedanta is now turning out to be an interesting corporate battle between the company and its shareholders, spearheaded by LIC of India.

Please click Delisting of Equity Shares- Process to have a better understanding of the concepts of delisting.

Vedanta Ltd is a major producer and exporter of iron ore in the private sector. The company has also business interests in power, Aluminium and copper. The company is listed in BSE and NSE.

Vedanta Resources is the promoter of Vedanta Ltd. The promoter had a shareholding of 50.14% as on March 31st, 2020. The remaining shares were held by public and institutions including LIC of India. The company announced voluntary delisting plan in May 2020 at an offer price of Rs. 87.50 per share for the public share holding of nearly 49%. The price arrived at as per delisting norms of SEBI was Rs. 87.25. The share had been trading at much higher price during the past, but the depressed market conditions on account of Covid-19 pandemic enabled the company to make the offer at the low price.

LIC of India is a major shareholder of the company with 24 crore shares and it had indicated that it would be bidding at a price of Rs. 320/- per share as it considered the true price of the share to be in that range.

The company was required to receive minimum 134.1 crore equity shares during reverse book building process to reach the threshold of 90% as specified in delisting norms of SEBI. The last time for tendering shares in the Reverse Book Building process of Vedanta was 7.00 PM on October 9, 2020.

As per the latest data available in public domain, about 90 Crore shares were tendered below Rs. 160 per share, another 15 crore shares between Rs. 160 and Rs. 300 per piece and around 32 Crore shares at Rs. 320 per share. As the 90% threshold or minimum 134.1 Crore share mark could be reached only at the price of Rs. 320 per share, the discovered price of Vedanta Ltd during the Reverse Book Building process stands at Rs. 320 per share as against the offer price of Rs. 87.50 per share.*

The company has to decide now whether the Exit price to be accepted or counter offer to be made. At the time of announcing the delisting plan, the book value of the Vedanta Ltd was Rs. 146.87 and the company subsequently reduced it to Rs. 89.38 by writing off capital reserve. This had attracted severe criticism from analysts.

If the company decides on making counter offer, the price must be between the book value and the price discovered (Rs. 320 per share). Considering the pattern of bidding made by the shareholders and the strong stance taken by LIC of India, any counter offer less than Rs. 146.87 may not be acceptable to the shareholders, despite the slash in book value. Clear picture of the battle will emerge in few days.

* As per the intimation given by the company to stock exchanges on October 10, 2020, the delisting plan is deemed to have been failed. By the expiry of the timeline, only 125.47 crore confirmed bids were received against the required 134.1 Crore shares. As per the release of BSE, another 12.32 Crore shares tendered in the process were pending for confirmation by banks and depository participants.  Meanwhile, the Merchant Bankers of the process have approached SEBI for extension of timeline by one day citing technical glitches. Clear picture on  Vedanta’s delisting plan will emerge by October 12, 2020.