If they would want to delist they would have to propose a merger of some sort, unlikely that such merger proposals would come so soon and resolution plans don’t seem to talk about any mergers.i think ultimately Vedanta would have to come up with atleast a 1 year plan to increase the percentage of public equity to 25% if the transaction is to be approved by sebi
Worth watching, lot of grey areas
They did not address how Vedanta is proposing to hold 90% stake in Electrosteel.
Most probably they are going to delist because even JSW-AION & Tata Steel are going to get only 75% stake for Monnet Ispat & Bhushan Steel respectively because they are both listed companies.
Is there any other way a company can hold more than 75% stake in a listed company?
Disc: Invested
it was a bad idea to bet on Electrosteel Steels. I was lucky to get an exit.
Tata group has taken control of Bhushan Steel, as per the latest disclosure the present MD is deemed resigned pursuant to implementation of resolution plan.
According to this plan banks and tata group have issued & subscribed to new shares
Bank - 7.25 crore
Tata group - 79.44 crore
I have not seen any declaration for existing share holders therefore I am assuming they remain as is.
In today’s declaration to BSE titled Board Meeting, A point for redeemable preference shares is mentioned. I could connect when they were issued and does redemption means they will not exist anymore?
Tata group will also bring 35k crore rupees by way of debt into the company.
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Hi,
Tata’s Bhushan Steel bid has to be one of the most value destructive ever possible for existing shareholders. As per announced plans Tata Steel subscribes to 120 cr shares by investing 180 cr (that’s Rs. 1.5 per share). It then retains an option to buy another 4500 cr shares at Rs. 2 each giving it a 98% post issue equity. BUT as if that were not enough, the fact that existing debts of 56000 cr are being written down to 35,000 odd crores by banks is also not a relief being passed on to the Company. Tata Steel buys the remaining 20,000 cr debt for 100 cr and in the future when Bhushan Steel makes profits, this 20,000 cr debt will be repaid by Bhushan Steel to Tata Steel. This is preposterous.
Its a mockery of the existing minority shareholders. And its only possible cause in the entire Insolvency Act, the existing shareholders rights have been totally denied. Just like you have a Committee of Creditors that must approve and evaluate bids received for buying an insolvent company, the existing shareholders should have some voice at least in the resolution OR else in every instance you are going to see the existing shareholder totally written off or offered a few bread crumbs at best.
Disclosure : Had bought Monnet Ispat but immediately liquidated position on announcement of Jindal-AION final revival plan. Don’t hold any other IBC stocks.
Thanks
Gautam Chhabria
In my opinion a shareholder is the part owner of the company and should be treated in the same manner as the promoters. In a IBC case, the shareholders are the last in queue for getting any residual benefits. The moment a company goes into bankruptcy, the value of ita shares becomes zero. If the promoters are losing their companies without any compensation, the minority shareholders should not expect anything.
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I completely agree with Abhishek. On this thread, again and again we were trying to highlight that when Financial lender take hair cut, which mean the cashflow to equity shareholder negative (as there is deficit even to service debt), the value of equity is maximum nil. Unfortunately, many minority shareholder were expecting to gain from hair cut of lenders which was not correct in my view. We tried to highlight this risk repeated on this thread.
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Everyone was expecting a dilution. The idea was, if SEBI stuck to current laws where promoters can’t go over 75%, minority shareholders would have benefited even with 300% dilution in Bhushan steel. What has left a bitter taste is Sebi hasn’t still clarified on this matter… This supposed change in the law should be applicable to future IBC cases, can’t be applied retrospectively.
Please read this thread. I was suggesting that Public shareholding of 25% would also include banks which converted hair cut on debt and invoked pledge. Given enterprise value, the Haircut from bank would be higher if they are given increased stake of equity. The expectation from minority shareholder was more of hope that lender take hit on debt and they gain from equity value because of SEBi regulation of minority shareholder of 25%. However what they missed that Bank would also convert debt into equity/ or invoked pledged and that would classify as public shareholder. Further, To expect new investor who is taking risk to revive company which is problem and to share reward that efforts with minority shareholder of bankrupt is little too much to expect in my opinion. Why should Tata/Vedanta shall share wealth with minority shareholder whose equity is nil(as company is bankrupt and lenders are taking hit) what about minority shareholder of lenders and acquirer if benevolent treatment to bankrupt company minority shareholder get unfavourable favour? There are no free lunch. Gain from one side would mean other side getting lesser benefit.
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Where is value for equity when lenders are taking cut on debt? Basic of Finance are equity shall take first hit in case of failure of business followed with lender. I find peculiar that we expect lender to take hit but no hit to minority shareholder of bankrupt company!
Even the banks are losing out… How can Vedanta have 90% stake in a listed company under current laws?
If you do not give full stake to new investor then would you expect anyone to invest in distress debt l? In fact Tata has really created template for NCLT refered company for future. The benefit would come only after every penny of debt paid. Let us assume we are interested in buying and turning around bankrupt companies. Would we like to share wealth with minority shareholder of failed enterprise?
Look, we all invested based on the current law of the land. Tata can suggest anything, but the day when most invested, the law was in a listed company, promoter can’t be over 75%. That was the premise, in fact, I am yet to find any document saying this has been relaxed in the case on IBCs. I know its a discussion paper, but nothing official has come out.
On another I would like to know your thoughts on Jaypee Infra. Here the asset value is more than the debt.
If value in Jaypee are higher then debt, like in case of Binani Cement, what is is excess over debt, same comes to equity owner. There are no two opinion on them. However, value on book on running business and liquidation value in distress situation has many moving part. Let us wait and watch how things progress then to jump on any conclusion
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Agreed, lets see what comes out of Jaypee. its been a tough learning, got smacked in Bhushan & Monnet and sold out when ESL deal came out. What is ironical, Bhushan is hitting UCs
N Jayakumar - “Today Sebi has made it very clear and the rules will change but whether the money coming in from the new promoter can take the promoter stake to beyond 75% is not very clear.”
Tulsian with 40 yrs capital exp said the same thing
No of shares = 22.65 crore (Before implementation of resolution plan)
New shares issued to bank = 7.25 crore
New shares issued to Tata = 79.44 crore
Total no of shares = 109.34 crores
% of share holding - Tata (promoter) = 72.65%
as of date no SEBI regulation has been violated. Can you elaborate a little more on your point of view?
Tata apparently have an option of converting 9,000 crore in equity. That would take them over 75%. All depends on SEBI allowing 75%+ holding in a listed company. ESL seems to be going that way