Vedanta’s Delisting failure communication to BSE.
There is no counter offer …? 
1 Like
No. Counter offer comes up when RBB goes thru which is not the case here.
The co. is back to being the value trap\undervalued bargain depending upon which side you belonged to prior to delsting… 
2 Likes
There is some rumour going on that delisting was more to shore up the valuations and buy time so that the pledged shares were not sold. I don’t subscribe to the view but feel bad for all those who would have played the delisting special situation game. Promoter has made it clear that he considers the dividend paid to minority shareholders as “leakage”. All those (maybe very few) in denial of the quality of this promoter should wake up.
The linkedin post which was widely shared and without any disclosures of ownership would have sucked in lot of retailers. It said - “Considering that Mr Agarwal can gain immensely by successfully delisting the company, a final price of ₹300 to ₹350/share is possible. There may be no downside. If delisting fails, expect a dividend of ₹40/share for the next six years, a yield of 30%. Even at the current market price of ₹130/share, Vedanta Limited stock looks like a solid buy.” (Emphasis mine) Any time one of these “experts” say risk free, limited or no downside, be very careful. Most are interested parties.
Let’s see where the stock settles now. Who can trust that this promoter will not change the dividend distribution policy going forward.
disc - no interests
4 Likes
He started a Telegram group just for this, 400+ people are member there. Yes he is interested party as he participated in it (as per group chat). There may be other unknown interest, but than all along and now also people are saying MFs had other interest (than working for unit holders).
.
At least for every one to read, his linked profile does not claim to be an equity analyst/expert.
(bought Vedanta for delisting gains)
Just a thought - how has SEBI Safeguarded the interest of minority shareholders by not granting a day’s extension to Vedanta as was done in Hexaware’s case?
2 Likes
Thanks for inputs on delisting.
One thing which is very confusing is who was tendering shares for delisting below market price and near to floor price? And why?
1 Like
Some Trustees of Mutual Funds and/or Insurance companies allowed them to offer the Vedanta Shares for Delisting between Rs. 150 to Rs.170/-…when LIC held the value at Rs.320/- . Losers are Unit Holders( Reference - This is taken from a tweet by Ajay Bagga on Twitter - i don’t know how to copy the tweet & paste or link it in this post … Hence mentioning by words.)
I don’t know the names of these funds or insurance companies. As per Anil Singhvi- Icici Pru MF(4.81%), HDFC MF(3%) and Citi Bank (4.37%) were the big institutional holdings apart fromLIC (6.37%). if this is true, can we consider these Mutual Funds/ Insurance Companies to be unfriendly to minority /small investors and stay away from these mutual funds?
Discl- i have holding in Vedanta, but had not offered my holdings in the RBB for Delisting.
To the Admin - this is my first post on this website… if you find it inappropriate, please remove it.
Assigning value and realizing it are two different things. If LIC thinks this is worth 320, why don’t they give an open offer at 160? They can make 100% on their investment.
90 Crore shares were tendered at 160 or below. LIC single handedly sabotaged the issue. Now it may take months or years to get to even 160.
Delisting failed because it could not get 90% of the shares tendered - be it technical issue or whatever. No point in blaming LIC for bidding higher or for that matter MFs for bidding lower. There is control premium which anybody has to pay for getting controlling ownership. LIC thinks 320 is fair price for getting this control premium. It is not in the business of running other companies so why should it give open offer. If prices fall much they can buy from market if they want. MFs played safe and bid lower so that they can get exit at whatever price was discovered. LIC has very long investment horizon compared to MFs and also does not want to be seen as favouring the promoter when its own IPO is being planned. For long it has been forced to invest in PSUs and first time seeing it do something different.
disc - no interests
3 Likes
Fair point. But LIC seems to have confused quality of business and quality of management. Saying that LIC invests for very long term assumes that the value WILL be realized in the long term. With current management and what they have done in the run up to RBB, it is highly doubtful that market will give premium valuation to any business run by the same promoters.
2 Likes
The immediate positive trigger to watch out for is dividend, as Vedanta Parent is in need of money there is a good chance for a healthy dividend payout using Hind Zinc dividends. “[Upset] Promoters” could disappoint minority share holders here, so one should enter only if they are ready to hold it for medium term.
Disclosure: Reentered @98 today and weightage is <1%
i am not sure - but if they decide to take intercompany loan from Vedanta … to pay for the debt of VRL ( Vedanta Parent)… then that could be negative for the minority shareholders.
i agree that - if a big dividend is declared … then it will be atleast somewhat positive for the minority shareholders.
Disclosure - I participated with a small personal allocation for my own experience & learning while we did not put any capital of our investors in our services in the delisting considering the uncertainties which always surrounds delisting in general.
Now coming to this delisting, to me, it looks like a case of LIC changing its stance post informally agreeing to something else with the promoters. And I think it was unfair on their part to do so if indeed did so which I think carries a very high probability. I am saying this because Vedanta delisting could not have succeeded without LIC tendering at a price pliable for promoters is known to the world and certainly to the smart promoters of Vedanta. Also, this price can not be 320 per share is also known to everyone. So it is just not possible that promoters of Vedanta did not take LIC into confidence before going ahead and raising USD 3.15 billion dollars from international capital markets at an obnoxious interest rate of almost 13%. However public institutions are known to toe the line of their political masters who work for their own political considerations and this case may not have been very different. Also, if LIC really feels that this is worth 320/share then they must now buy from the open market now that the share price is less than 1/3rd the “minimum fair value price” as per the words used by LIC Chairperson in its CNBCTV18 Interview.
Also, the reason there was no counteroffer possibility also because the book didn’t build and the reason was that most of the investors sitting on the fence decided to sell instead of tendering the shares as the chances of delisting not going through became very high once LIC bid at 320. Had LIC bid at a saner number, the book would have been built and even if the price wasn’t acceptable to promoters of Vedanta then at least a counter-offer would have come. But with 320 as the price, the hope of any middle ground quickly evaporated.
I also do not subscribe to conspiracy theories being floated on social media that the purpose of delisting was to support the stock prices. Looks like a very long shot and low probability event given the elaborate debt fundraising exercise involved to get the delisting process rolling.
Now coming to the investors/traders who are still holding this, I think this can turn into either way. Vedanta resources which is the promoter entity of Vedanta Limited definitely needs a lot of cash from its downstream entities i.e. Vedanta Limited and Hindustan Zinc. This money can either be routed as an interest-bearing loan or dividend. If it is coming via dividend like it has been all these years, then certainly Vedanta Limited is trading at double-digit dividend yield and contains a lot of value. However, if there are other capital misallocations like Loan to Vedanta resources from Vedanta or HZL etc then it would be a signal to sell the stock. One may choose by tracking the future capital allocations closely.
The other thing which retail investors should know is that stocks like Vedanta are highly cyclical - which means that normal retail investors should ideally stay away from it. Of course, there is a lot of money to made in such opportunities but making money in such stocks requires a much higher level of skill as one needs to buy as well as sell at the right point of the cycle. This is a skill which in my experience, most small investors are not good at. But those who are holding the stock should read my advice in the above paragraph.
Regards,
Sarvesh Gupta
Disclosure - I run my own equity advisory firm. Views are personal.
9 Likes
No point in blaming LIC, Vedanta promoter made an attempt to delist at lower price and failed. Traders who tried to capitalise this special situation got trapped. There will be volatility as street speculates on the next steps such as dividends. Once all settles down, stock would take its own time to reward investors. Agree that cyclicals are risky and not everyones cup of tea, but Vedanta is at somewhere closer to bottom so the risk-reward is favourable. If one believe that metals demand would pickup in the next 1 - 3 years, then can start building position slowly.
5 Likes
Sorry for my ignorance. but can anybody explain - what is meant by confirmed bid … and what is unconfirmed bid? As i understand - when i do the bidding - i have to give details of my Demat Account. So where is the scope of ambiguity?
Regarding confirmed and unconfirmed bids, my understanding is that confirmed bid is where the sellers would have put in shares against their bid while unconfirmed is where they did not. These would likely be traders who would have planned to buy shares from the market towards the end of the tendering window looking at the chances of delisting going ahead. So they either did not buy those shares eventually or sold the bought shares sensing failure of delisting and hence their bids remained unconfirmed.
1 Like