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Promoters to acquire 10% stake in Vedanta: Should investors tender shares in open offer?

In the past two months, Vedanta's share price has outperformed the market, surging around 26 percent and 33 percent in November and December, respectively.

January 14, 2021 / 09:13 AM IST
 
 
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Billionaire Anil Agarwal-led Vedanta Resources with Twin Star Holdings, Vedanta Holdings Mauritius and Vedanta Holdings Mauritius II have announced a voluntary open offer for acquiring 10 percent equity shares in Vedanta after the failure of a delisting offer in October.

The promoter and group companies decided to acquire up to 37,17,50,500 equity shares (representing 10 percent of the fully diluted voting share capital) of the mining company from the public shareholders.

The offer price has been fixed at Rs 160 per share, a 12 percent discount to the closing price on January 8.

Analysts are optimistic about the prospects of the company, given the global economic recovery but are cautious about the offer price and advise investors not to tender shares.

"Open offer price by promoter group remains unattractive which is a 12 percent discount to the current price. Considering all the parameters, we advise investors not to tender shares in the open offer. Given the upcycle in commodity, we expect a substantial rise in the stock price in the medium term but for near term, the share price may see some pressure due to lower offer rate," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.

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As the offer was below the market price, it could have a negative impact on the share price, Gaurav Garg, Head Research at CapitalVia Global Research said.  "The offer is not as per the expectations of the investors and thus the fairness of the price is still a question for the shareholders," Garg said.

In the past two months, Vedanta share price has outperformed the market, surging around 26 percent and 33 percent in November and December respectively. On January 13, it closed at Rs 180.40, gaining 81 percent in the past three months after its delisting offer.

Vedanta failed to get strong response to its delisting offer, from public shareholders, in October 2020. Its five-day reverse book building (RBB) process, which ended on October 9, saw only 125.47 crore confirmed bids against the required 134.1 crore shares to successfully delist from the exchanges. The floor price for the offer was Rs 87.25 per share, which was far below the street expectations.

As per Sebi norms, the delisting offer is successful only if the promoters' shareholding after the process increases to 90 percent or more. But in December, after the delisting offer failed, Vedanta Resources' subsidiaries acquired a 4.98 percent equity stake in Vedanta via open market transaction, taking their stake to 55.11 percent from 50.14 percent in the September quarter.

As per Sebi norms, the company can not launch another delisting offer for a year after the failure of the previous offer.

Tapse said the management wanted to use these steps—open offer, delisting—to increase promoter shareholding and attempt another delisting in teh future. Any increase in promoters' stake would make it easier for them to delist after the cooling off period.

"Well assuming the discovered price being Rs 320 in last failed delisting offer, one can expect the stock to trade in the Rs 240-260 range on or before the next delisting attempt as per Sebi norms," said Tapse, who remains optimistic about the company.

Garg, too, is positive on the mining giant. "The company has reported sound results in the past two quarters with steady performance in terms of revenue. Vedanta also has higher volume in aluminum, zinc and oil business, which generates good cash flows for the company which could drive its earnings as well," Gaurav Garg said.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Jan 14, 2021 09:13 am

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