Vedanta Delisting

Delisting at 87.50? No way.

Remember 

"गब्बर के ताप से सिर्फ एक ही आदमी बचा सकता है, वह है खुद गब्बर" 

Same is true for Vedanta Delisting. If you abhor the price or the promoter, push the delisting to RBB stage and quote your price.

VEDANTA DELISTING, SHORT NOTE

#VedantaDelisting
After board approval, next is shareholders special resolution. Per Companies Act 3:1 shareholders to vote in favour but per SEBI delisting 2X:1  Public shareholders to vote in favour to move ahead. 

VEDANTA DELISTING - Let's not stymie it.

SMALL INVESTORS’ WELFARE ASSOCIATION

Email : SirenBajao@gmail.com

updated 29.06.20  

Almost everyone is bashing Mr. Anil Agarwal, the billionaire promoter of Vedanta for his move to delist the company. This is more of a trust deficit and his past haunting him. How shabbily he has been treating his investors.  The experts are advising the independent directors to vote against the delisting move in the Board meeting. If the move to delist is shot down in the Board meeting, the share prices will immediately tank by 10-20% or more. That will be the biggest disservice to the investors.

 Let me play the devil’s advocate.

The advice to reject the delisting stems from the proverbial “ DUSSARE KI THAALI ME GHEE JYAADA”  syndrome. The fact that we, as small shareholders are gaining, is ignored because of the perceived great advantage that Mr. Anil Agarwal will get. The delisting at this juncture is in the interest of the investors and has boosted the market confidence in the scrip. Investors were otherwise forced to dump it at a heavy loss. The analysts are coming out with all kinds of data and values for the company shares. No matter how well-meaning are these studies, they do not help investors for whom ‘BHAV BHAGWAN HAI”   

Till the other day everyone was hammering Vedanta stock as worthless. Bringing the prices down from a 52 week hi of Rs.180 on 27-june2019 to a 52 week lo of 60.20 on 30 march 2020.

News about the parents Bonds trading at up to 60% yield amidst rating downgrade by Moody further dampened the spirits. The investors were very uneasy and ready to dump the stock at whatever price they can get.  If we, as a small shareholder were hurt, the promoter as the biggest shareholders was hurt the most. He decided to show the world that the value of his share is much more than the world is willing to give. He said, ‘I am willing to buy the entire outstanding number of shares at Rs.87.50 or at such a price at which the majority of the shareholders are willing to offer me. Of course if the public is asking for the moon, I have the right to reject and walk away.’

On May 12, 2020 the price  went up 12.44% , and closed at 89.50 against the previous day closing of 79.45. Late in the evening we came to know the reason—Delisting proposal by its promoters. Clearly  some people had an advance information of the announcement to come and played the stock. Clearly insider trading was at play.

The key stages in the process of delisting are:

1.     Proposal by Promoters to delist

2.     Board of the target company approving the proposal

3.     Shareholders approving the proposal

4.     Adequate number of shares being participated

5.     The Exit price being acceptable.

6.     Consent of the lenders at Holdco. Bondholders would definitely have covenants that he cannot use the holding co’s income (dividend from vedanta Ltd. is the only income in holding co) for any other purpose except to pay their interest and principal.

It will be only in the interest of the investors if the delisting process is allowed to proceed.

DELISTING PRICE OFFERED-- Rs..87.50

In my role of Devil’s advocate, I feel Rs.87.50 declared as indicative delisting price is absolutely right. The justifications for this price are:

1.     It is the floor price, not a ceiling price. It can always be revised upwards  but can never be down written. Why commit a higher price now in such an uncertain economic scenario?

2.     It is an unwritten rule that the final exit price is minimum 25% higher and on an average, as some study has shown, about 50% higher. If the base price is set higher, it will make the expectations of the investors unrealistic and will cause failure of the whole exercise.

If the delisting fails or is not allowed to proceed, probably Anil Agarwal’s game plan will be defeated  and he will lose some likely advantage he is angling for. But the loss to the public shareholders will be immediate and quite harsh. There are ‘n’ number of failed delisting where  investors lost very heavily. Let’s not repeat it.

In conclusion there is no point in craning out your neck to count  the many mangoes lying on  the other side of the fence. Let’s ripen our mangoes and eat it.

 Twitter: @sebitakeover