Vedanta delisting fate to be known next week, price likely at Rs 160-170

Market players said the fate of the delisting bid could be determined by large shareholders like LIC, large FPIs and MFs.
Anil Agarwal-led Vedanta Resources is set to initiate its bid to take Vedanta private next week. The so-called reverse book building (RBB) process to determine the exit price for delisting will commence on October 5 and close on October 9.

The promoter holding in Vedanta is currently at 50.14 per cent. Under Sebi’s delisting regulation, the promoter will have to acquire at least 39.86 per cent stake (1.48 billion shares) from public shareholders to ensure that the delisting bid is successful. At Vedanta’s last closing price of Rs 139 per share, this could entail an outgo of nearly Rs 20,600 crore, making it one of the biggest delisting bids in the domestic market.

Vedanta Resources has fixed the floor price at Rs 87.25 for delisting. However, market players expect the delisting price to between Rs 160 and Rs 170 per share. This is based on the discussions between the promoter group and top institutional shareholders of the company.

At the end of the June 2020 quarter, top institutional shareholders in Vedanta were Life Insurance Corporation, or LIC (6.37 per cent stake), ICICI Mutual Fund (4.81 per cent), and HDFC Mutual Fund (3 per cent). Foreign portfolio investors (FPIs) hold around 18 per cent stake in Vedanta.

“The company has started reaching out to top shareholders to explain the price rationale for delisting. Based on the discussions, most shareholders, except LIC, have agreed to tender their shares below Rs 170 each,” said a person privy to the development.

Under the RBB, the delisting price is the maximum price at which the company gets sufficient bids to cross 90 per cent shareholding.

Market players said the fate of the delisting bid could be determined by large shareholders like LIC, large FPIs, and MFs.

If the discovered price is acceptable to Vedanta Resources, delisting will be successful. If the price is too high, the promoter has the option to reject the price and make a counter-offer. The counter-offer has to be acceptable to public shareholders to ensure successful delisting.

Earlier this month, Baring Private Equity had accepted the delisting price arrived through the RBB for Hexaware Technologies delisting, though it was 66 per cent higher than the indicative price given by the promoters.

Some market observers have analysed the funds mobilised by Vedanta Resources for the delisting bid to arrive at a ballpark delisting price.

Vedanta Resources has raised about $3.15 billion (Rs 23,000 crore) to fund the buyback. About $1.75 billion of this has been raised from banks on a three-month term loan facility and another $1.4 billion by amortisation of bonds.

Based on the funds raised, Vedanta Resources will be able to pay just Rs 125 per share to buy out the entire 49.5 per cent public shareholding. 

If the funds are used to reach the minimum 90 per cent threshold, the promoters can pay about Rs 155 per share.


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