Vedanta board okays delisting plan; floor price per share unfair, says IiAS

Topics Vedanta  | Delisting

Vedanta Limited stock price is currently trading close to its 52-week low
The board of directors of Anil Agarwal-led Vedanta met today to consider delisting proposal of the company. The board approved the same at the meeting.

Proposal by way of special resolution through postal ballot and e-voting, and in this regard the draft of the postal ballot notice and the explanatory statement thereto were also approved, said Vedanta Limited in an exchange filing. 

"We further wish to inform you that the company has received a letter dated May 18, 2020 from promoter company Vedanta Resources that the floor price of the delisting proposal is Rs 87.25 Per share which is determined in accordance with delisting regulations," noted the filing. 

"Delisting floor price at Rs 87.25 per share unfair; shareholders should have ideally got base price of Rs 225 per share," IiAS said

However, the final offer price for the delisting proposal will be determined in accordance with the reverse book building mechanism set out in the delisting regulations, it said.

Vedanta Limited stock price is currently trading close to its 52-week low, and at a steep discount to its historic five-year average - a natural fallout of the current economic environment and  the impact of the COVID-19 crisis on equity markets. Vedanta’s current market price does not reflect the fundamental value of the company’s equity.

Institutional Investor Advisory Services in its report said, "Vedanta’s independent directors have a fiduciary responsibility to guide shareholders on Vedanta Resources' delisting bid. This is in line with the practice followed in other markets. For example, independent directors of Essar Energy in 2014 rejected Essar Global Funds Ltd’s bid to delist – the committee of independent directors had termed that bid “opportunistic”. 

The issues are not very different here.Independent directors must avoid taking cover from regulation. Delisting guidelines protect the rights of minority shareholders when companies want to delist. It will be a shame if the board throws these regulations back at shareholders saying that as the price is going to be determined by reverse book-building, you decide the price."

The share price of Vedanta Limited from year 2017 to year 2019 is in the range of Rs 175 per share to Rs 300 per share with an average price of approx. Rs 225 per share. 

In normal circumstances, the minimum price to be offered to public shareholders by the promoters should have been the average price of stock for the last 3 years ie Rs 225 per share, said the report.  

The public shareholders should have ideally got a fair opportunity to tender the shares at a premium to this base price of Rs 225 per share.  

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