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Vedanta (VEDL) Delisting
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Vedanta Resources Limited (VRL) and its wholly owned indirect subsidiaries namely, Vedanta Holdings Mauritius Limited and Vedanta Holdings Mauritius II Limited, have issued a public announcement (See Here) with regard to the delisting offer on September 29, 2020 in order to delist Vedanta Ltd (VEDL) from Stock Exchanges. 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 final outcome on the success or failure of the delisting would be known on October 16.

Reverse book-building Process is a mechanism to determine the share price for delisting of a stock. Shareholders, who wish to participate in the delisting process, can tender their shares by quoting a price at or above the floor price.

Details

 Floor Price

 87.25/- per equity share

 Manager to the Offer

 J.P.Morgan

 Registrar to the Offer

 KFINTECH

 Advisor to the acquirers for the  delisting process

 DAM Capital Advisors Limited

 52 Weeks High

 166.05

 52 Weeks Low

 60.30

 

Key Highlights

1. Excluding ADRs, the promoter group holds 52.33% of the total issued paid-up capital and public shareholders hold 47.67% of the same. In order to delist, promoters would have to raise their shareholding to 90%, implying that public shareholders would have to tender approximately 79% of their holding.

 

No. of Shares (m) 

Incl. ADRs 

Excl. ADRs 

 Promoter

1864 

50.10% 

52.30% 

 Public

1854 

49.90% 

47.70% 

 In Equity form

1697 

45.70% 

47.70% 

 Under ADRs

156 

4.20% 

0% 

 Total no. of shares

3717 

100% 

100% 

 2. In addition to the gross debt of US$ 15.1 billion (INR 111,091Cr.) as of March 31, 2020, VRL has since announced and availed total debt financing arrangements of US$3.15 billion (INR 23,182 Cr.) (including issuance of US$1.4 billion (INR 10,303 Cr.) senior secured bonds and US$1.75 billion (INR 12,879 Cr.) term loan facility) to inter alia finance the total payments to the Public Shareholders and ADS holders of the Company following the proposed delisting of the Company.

3. As per SEBI (Delisting) Regulations, book value shall act as floor price for delisting. The book value for the Company, for financial year ended on March 31, 2020, is INR 89.38.

4. Q1 Earnings: Vedanta on October 3 said its consolidated profit for the June quarter fell 23.58% to Rs 1,033 crore from Rs 1,352 crore in the year-ago quarter, with EBITDA margin coming in at 28%. Net debt for the company stood at Rs 24,787 crore, down 14% YoY. Cash & cash equivalent stood at Rs 33,781 crore. 

Schedule of Activity

 

Risk factors relating to the Delisting Offer

  1. The Acquirers and the Promoter Group make no assurance with respect to the future financial performance of the Company.
  2. The Delisting Offer process may be delayed beyond the schedule of activities indicated for reasons beyond the control of the Acquirers and the Company. Consequently, the payment of consideration to the Public Shareholders whose Offer Shares are accepted under this Delisting Offer as well as the return of Offer Shares not accepted under this Delisting Offer by the Acquirers may get delayed.
  3. The Acquirers and the Manager to the Offer accept no responsibility for statements made otherwise than in this Letter of Offer or in the Public Announcement or in advertisements or other materials issued by, or at the request of the Acquirers or the Manager to the Offer, and anyone placing reliance on any other source of information, would be doing so at his/ her/ their own risk.
  4. This Delisting Offer is subject to completion risks as would be applicable to similar transactions.
  5. The Delisting Offer is being made for securities of an Indian company and Public Shareholders of the Company in the U.S. should be aware that this Letter of Offer and any other documents relating to the Delisting Offer have been or will be prepared in accordance with Indian procedural and disclosure requirements, including requirements regarding the offer timetable and timing of payments, all of which differ from those in the U.S. Any financial information included in this Letter of Offer or in any other documents relating to the Delisting Offer, has been or will be prepared in accordance with non-U.S. accounting standards that may not be comparable to financial statements of companies in the U.S. or other companies whose financial statements are prepared in accordance with U.S. generally accepted accounting principles.
  6. The receipt of cash pursuant to the Delisting Offer by a Public Shareholder of the Company may be a taxable transaction for U.S. federal income tax purposes and under applicable U.S. state and local, as well as foreign and other, tax laws. Each Public Shareholder of the Company is urged to consult his independent professional adviser immediately regarding the tax consequences of accepting the Delisting Offer.

Conclusion

VEDL’s cost reduction in Aluminum, completion of capacity expansion in Zinc, and expected ramp-up in Oil & Gas should support earnings growth in FY22.

In May, hindustan Zinc Limited (HZL) paid dividend amounting to close to Rs. 7,000 crores to its shareholders, out of which approx. Rs. 4,500 crores was received by Vedanta. According to the Dividend Distribution Policy of the Company, entire dividend received by Vedanta from HZL (other than special dividend) is to be passed on to its own shareholders as it is. Vedanta held 64.92% in the company as of June 30. Vedanta’s stake in HZL alone is valued much higher than the floor price.

After the bids are collected, they are arranged in lowest to highest order. As soon as the total bids touch 90% of share capital in that order, that bid price becomes the price that the acquirer needs to pay if he wants to delist the company. Fair range comes much hires above the floor price, considering the value that is seen in the business. SES, a governance advisory firm, also seek a 129-186% premium to the indicative offer price set by Vedanta Ltd. to buy back shares for delisting from stock exchanges.

 

Disclaimer

The author may have positions in the stocks as mentioned in the article above, please assume us to be biased. This is not a recommendation to buy or sell securities. This is purely information about the company mentioned.  Equity investing contain risks and please consult your financial adviser for any buy and sell securities!

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