Vedanta Resources Plc's revised open offer price for buying shares in its flagship Indian firm is better and investors should go with it, analysts have told Moneycontrol.
Anil Agarwal-led Vedanta Resources on March 16 raised the open offer price for buying shares in Vedanta Ltd to Rs 235 per share, nearly 4 percent higher than the trading price. In January, Vedanta Resources had offered to buy up to 10 percent in Vedanta at Rs 160 apiece.
Read more: Vedanta ups open offer price for Indian unit to Rs 235/share
"The open offer price of Rs 235 per share is a better deal than the earlier offer price of Rs 160. Considering the stretched valuation of the Indian equity market and rising bond yields in the US, which pose the downside risk for the emerging market equities, we would recommend existing investors to go with this offer," said Vinit Bolinjkar, Head of Research, Ventura Securities.
The open offer, which starts on March 23 and closes on April 7, came after Vedanta Resources failed to delist its Indian entity last year.
In October 2020, Vedanta Resources had failed to garner the required number of shares to delist its Indian arm at the offer price of Rs 87.5 apiece. During the delisting offer, promoters were able to get only 125.47 crore confirmed bids against the required 134.12 crore shares.
Yash Gupta, Equity Research Associate at Angel Broking, also recommended tendering shares at the open offer.
"We recommend retail investors to tender share as the company has increased the price from 87.5 in October 2020 to Rs 235 in March 2021, a jump of more than 165 percent. If we look at the last tender price indications, last time major bidding was done in the range of Rs 135 to Rs 250," Gupta said.
"We expect this price to represent the fair value of Vedanta. Currently, the promoter holds 72.6 crore shares, representing 55 percent of companies holding," said Gupta.
Likhita Chepa, Senior Research Analyst at CapitalVia Global Research, said though the price offered was at a premium to the current trading price, it should not be the only factor that investors should take into consideration.
Chepa said with the resumption of economic activities and rebounding demand, the metal sector was back on track.
Increasing crude and metal prices are making the long-term prospects of Vedanta promising. India’s increased investment in infrastructure and power is likely to benefit this firm in the medium to long-term and government initiatives like Make in India are expected to further drive the demand.
"However, not everything is in favour of long-term investors as concerns on high debt at the promoter level still exist. Therefore, investors should consider all these factors and make an informed decision. However, short-term investors can consider tendering their shares as the offered price is at a handsome premium," Chepa said.
Geojit Financial Services Head of Research Vinod Nair, too, said the fundamentals of Vedanta had improved with rising non-ferrous prices. "We can expect the minority shareholders to tender their shares but full tendering of 17.5 percent of equity shares might be challenging due to fragmented shareholding. Tendering by key institutions like LIC will be the key for the success of the buyback," Nair said.
Disclaimer: The views and investment tips expressed by investment 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.
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