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The Original CHAUKIDAAR ,“TAKEOVER WATCHMAN” since 2007. CA. Arun Goenka* hands-on experience in the share market* deep knowledge of laws and account*one of the early players, pioneered an investment strategy in TAKEOVERS*The WIRC - of The Institute of Chartered Accountants of India, has honoured him with the ‘Recognition of CAs in Social Service’. * often invited by National business news; electronic and print media, for his views on SEBI related matters. * history of red-flagging 100+ cases to SEBI* contributes by giving inputs in drafting amendments to the regulation* Some of the suggestions reflected in subsequent regulatory changes: (a). In takeover of Cairn 3,750 Crores non-compete fees waived off and ultimately Removal of Non-compete fee in 2011 (b) November 2009 amending Regulation 11 (1). (c)Listing agreement baring promoters from voting on related party. (d) Disclosure of past performance by merchant bankers in case of IPO (e) SAST 2011 regulation 10(1)(h), (f) Counter Offer in case of Delisting (g) Interest payment to all in case of delays in Open Offers(05.06.20).

Friday, October 16, 2020

VEDANTA: MASSIVE DIVIDEND COMING

 AA has started milching the cash cow—Hindustan zinc Ltd.

Yesterday (15.10.20) night at 2215 hours, Hindustan zinc (HZL) informed stock exchanges that it was modifying its agenda for Oct 20 board meeting to include interim dividend.  This is a typical AA style. First on 13.10.20  at around 10.12 he simply informs about the Board meeting keeping us guessing DIVIDEND NAHI DEGA?  After making our palpitations go high, now is the time for Vedanta shareholders to rejoice. Fortunately the pipeline to the London HQ of the parent passes through us. My calculations show a minimum dividend of 50 from Vedanta. 

1. In June this year, HZL took credit rating from Crisil for Rs 16,000 Cr borrowings via CPs and NCDs. Added with its recently enhanced bank borrowing limits (fund  & non-fund based) of Rs 2900 Cr AND its June 30 Cash & equivalents balance of Rs 15,480 Cr, gives an aggregate firepower of Rs 34,380 Cr. Theoretically, it can easily translate to a massive dividend of Rs 30,000 Cr or Rs 71 per share. At 64.9% holding in HZL, Vedanta could get cash inflow of Rs 19,470 Cr.

2. In May earlier this year, HZL had given an interim dividend of Rs 16.50 per share or Rs 6971 Cr of which Vedanta received Rs 4524 Cr (64.9% holding). This was not passed on to Vedanta shareholders despite a clear dividend policy and Anil Agarwal has been facing shareholder ire from Vedanta shareholders.

3. The aggregate of items 1 and 2 work out to Rs 23,994 Cr potential dividend from Vedanta to its shareholders i.e. Rs. 64.50 per share (371.7 Cr shares outstanding in vedanta).

4. With the failure of de-listing and with egg on his face of shareholders massively losing out (share price fell from Rs 140 levels to Rs 95 levels in a matter of days in last one week), Anil Agarwal faces an uneasy bond with his own shareholders with whom he now has to live on. There is an urgent need to appease his fellow shareholders and Vedanta’s dividend policy explicitly states that HZL dividend received will be passed on to Vedanta shareholders. This is also to help the cash starved parent facing default.

5. Against the calculation of a potential Rs 64.50 per share dividend as per item 4 above, one should definitely expect a Vedanta board meeting shortly to declare Rs 50 per share dividend to Vedanta shareholders.

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5 comments:

  1. Sahaj MakhariaOctober 16, 2020 at 9:23 AM

    But what if one more inter corporate loan

    ReplyDelete
  2. CA. Arun GoenkaOctober 16, 2020 at 9:27 AM

    Investigations are already on for the earlier ICD. I don't think he will invite more action from the regulator or rather he may be forced to pay back the earlier ICD. But then you never know. we can only make our guess

    ReplyDelete
  3. AnonymousOctober 16, 2020 at 9:28 AM

    Is there a chance for buyback instead?

    ReplyDelete
  4. shajOctober 16, 2020 at 7:17 PM

    Why not a buyback instead of dividend?
    If HZL declares 60 Rs dividend, VEDL will get 16500 cr.
    VEDL easily buy back 25% shares at INR 160

    ReplyDelete
  5. Vishal ShahOctober 20, 2020 at 5:10 PM

    16.5 previous interim dividend plus 21.30 of current dividend by HZL results into Rs 24 per share dividend by Vedanta.

    ReplyDelete

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