Vedanta Resources (VRL) and other promoter group companies have received stock exchange approval for delisting the shares of Vedanta Ltd.
Vedanta shall now dispatch the Letter of Offer, along with a bid form, to public shareholders by October 1, 2020.
As per brokerage firm Motilal Oswal Financial Services, the reverse book-building process for public shareholders to tender their shares would take place over October 5–9, which would result in the discovery of the final offer price.
The price at which equity shares, through eligible bids, take promoter holding to 90 percent of paid-up equity capital would be determined as the final exit price.
Upon the discovery of the final exit offer price, the promoter group would have the option either to accept or reject the price.
In case the final exit offer price is not acceptable to the promoter group, it could make a counter-offer within two working days from the discovery of the final exit offer price, i.e., October 13, 2020, said the brokerage.
The brokerage has maintained a 'neutral' call on the stock with a target price of Rs 148.
"We have factored in the post-COVID recovery in commodity prices in our estimates. Vedanta’s cost reduction in Aluminum, completion of capacity expansion in Zinc, and expected ramp-up in oil and gas should also support earnings growth in FY22. Over FY20–22E, we estimate an 11 percent CAGR in EBITDA and 32 percent CAGR in EPS," said Motilal Oswal.
Excluding ADRs, Vedanta's promoter group holds 52.33 percent of the total issued paid-up capital and public shareholders hold 47.67 percent of the same.
In order to delist, promoters would have to raise their shareholding to 90 percent, implying that public shareholders would have to tender nearly 79 percent of their holding, said Motilal Oswal.
As per the brokerage, VRL has secured funding of $ 3.15 billion through the issue of three-year 13 percent yield bonds of $1.4 billion and a three-month term loan of $1.75 billion. VRL shall use the fundraise to buy out a minority stake in Vedanta and use the surplus to redeem a portion of VRL’s $670 million Jun’21 bonds.
"Assuming 100 percent of the fundraise is used to buy out all the public shareholders, the implied potential delisting price amounts to Rs 137, in line with the current market price," Motilal Oswal said.
The promoter group is required to announce within 5 working days from the closure of the bid period, i.e., October 16, 2020, regarding the success of the delisting offer, along with the final exit price, or the failure of the delisting offer.
If the delisting offer is successful, the promoter would be required to pay the consideration to public shareholders within 10 working days of closure of the bidding period, i.e., 23rd Oct 2020.
Following the payment of consideration, the company would make the final application to the stock exchanges. Upon receipt of their approval, equity shares would be delisted, Motilal Oswal pointed out.
The rest of the public shareholders may tender their equity shares to the promoter up to a period of one year from the date of delisting. And, in such case, the promoter would accept the equity shares at the final exit offer price. Continuing public shareholders shall have the right to vote and receive dividends (as and when declared), Motilal Oswal added.
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