“VRL’s indicative offer price is below the current price; we believe the discovered price may be much higher. When VRL was taken private on the London Stock Exchange, it was at a 27 per cent premium to its previous close. In Polaris India’s delisting, the indicative price was 60 per cent above the floor price, while the discovered price was 2x the floor price,” said CLSA in a note.
Stakeholders Empowerment Services (SES) has questioned the fairness of pricing. “The offer is not serious, given the expectation for investors to lap it up at a price below half its 52-week high — which is almost 45 per cent of its book value (March 31, 2019). With dividend yield of over 20 per cent when interest rates are at a historic low, this questions the wisdom of investors. Finally, is the price fair? Unequivocal answer is no,” SES analysts Varun Krishnan and J N Gupta said in a note.
Vedanta owns significant stake in marquee businesses such as aluminium, oil and zinc (Hindustan Zinc), which generate a lot of cash flow.
Kamlesh Bagmar at Prabhudas Lilladher also feels minority shareholders should not tender shares at the current offer.
Further, the delisting has to be carried out through the so-called reverse book building process, in which shareholders get to tender their shares at the indicative price or more. Promoter shareholding has to cross 90 per cent.
If the price discovered through book building is higher, promoters have the option to make a counteroffer. Experts said the counteroffer cannot be less than the book value determined by investment bankers.
As of September 2019, Vedanta’s book value per share was Rs 178.
SES has urged Vedanta’s board of directors to debate the fairness of the price and other options before the shareholders. Vedanta is quoting at half its 52-week high of Rs 180.