VEDANTA DELISTING - Let's not stymie it.-follow up 06.06.20

SMALL INVESTORS’ WELFARE ASSOCIATION

Email : SirenBajao@gmail.com

VEDANTA DELISTING - Let's not stymie it.-follow up 06.06.20

Vedanta has declared the results today with a loss of Rs.12,083 Crs. This loss is not an Operational loss but an optional loss. The company has decided to take a hit of Rs. 17,132 Crs.in this quarter  as impairment in its oil assets.

As a shareholder of the company, I should be very upset at such a bad result but I am not. I am no longer a long term investor in the company. My immediate focus is DELISTING. The first question that comes to mind is why such a huge exceptional write down just before the big event of delisting? It seems that all these actions are supposed to lead the delisting offer to success. Puzzled? Let me explain. 

Assuming the success of the Postal Ballot, the delisting offer is now headed for Reverse Book Building (RBB). The discovered price in the RBB is the price at which the Acquirer/Promoter can delist the shares. How this price is discovered? The price at which the cut-off level is reached, i.e. the price at which the promoter’s holding is able to reach the 90% level, is the discovered price.  Had the results been very good, no doubt people’s expectation would have gone  up and the RBB price would have shot up. With such a bad result people would be willing to dump their shares. In fact if there was no overhang of Delisting offer, there would have been heavy selling on next trading day, i.e. Monday  08.06.2020 bringing down the price of the shares. As against this, if I am able to correctly understand the price movement on Friday (05.06.20) with heavy volume and  scheme of things to come, on Monday the prices will shoot up because with this kind of heavy write down, the success of the delisting offer is  ensured. How?

1.     At the first place the RBB itself will be lower and more reasonable and at an acceptable level for the promoters. Before such a bad result the, the prices of Vedanta shares were hovering in the region of 60-80, if there was no delisting, you can bet, the price would have slipped further. It is now in the interest of the shareholders to pray for the success of the delisting. Be reasonable. A 50% premium to the indicative price will mean a price around 125-135. This should be acceptable to the acquirer.

2.     Secondly, recall what happened  in the case of LINDE India(January 2019)? The discovered price was Rs.2,000/- as against the market price of about 700, the acquirers called–off the delisting. It seems that the promoters of Vedanta are preparing themselves for such an eventuality. By taking such a huge impairment/loss they are reducing the book value. As per Regulation 16(1A) of the Delisting regulations, the promoters are now allowed to give a counter offer but such counter offer cannot be lower than the Book- Value. On a rough calculation, the book value is coming to around 148.

Thus my guess is that the delisting offer can fetch you a price of around 125 or a maximum of Rs.150.

6^th  June 2020

SEBI consultation paper on Delisting Issued on: March 16, 2020- our suggestions

Suggestions to  SEBI sent  on 06.06.20 on the proposed amendment to Delisting Regulations in response to SEBI's

 

Consultation Paper on “Amendment to Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 for Schemes of Arrangement”

We have gone through the suggestions and have following comments to offer:

1.     1.   This seems to be the right step in allowing liberties to corporates in arranging their scheme of things at the same time protecting the interest of investors.

2.       2. The corporates were in any case able to delist their subsidiary companies without following the process of delisting by simply following the process of merger. Example—Ranbaxy was merged into Sun Pharma without there being any delisting offer. The only advantage that this proposed change will provide the holding company is that the subsidiary will be able to maintain its distinct corporate entity. This could be useful in case of various  licenses and registrations etc.

3.       3. A vice-versa delisting process should also be allowed; i.e. the holding company getting delisted and  becoming the unlisted  WOS of the present day subsidiary. Ultimately the Holding and subsidiary swapping their roles. There could be cases where there are cross holdings and the subsidiary is also holding substantial percentage of shares in the holding company. In any case they can still get delisted without giving a delisting offer by dopting the route of merger.  The only advantage that the change in the Delisting guidelines will provide is, the companies will be able to maintain their separate corporate identities.

4. Majority of the delisting happen at a substantial premium; almost about 50% higher, to the floor price determined as per the formula given in the Delisting Regulations. We suggest that this must be factored in the swap ratio formula. In the example given in the paper, if the value of shares of “S” and “P” both is same, the swap ratio should not be 1:1 but it should be 1.5 : 1 in favour of the shareholders of the companies getting delisted.  This will take care of the delisting premium that the shareholders may lose. 

Reliance Rights issue- Difficulties to Small investors

TEXT OF LETTER WRITTEN TO SEBI AND MERCHANT BANKERS  OF RELIANCE

The present Rights issue of Reliance has many first to its credit. The biggest Rights issue in the country has come in the most difficult time in the world history, a never heard of event LOCKDOWN. It is completely paperless. The abridged Letter of offer keeps on referring to page nos. of Letter of offer, no such link for which is given in the letter. In spite of the lockdown the entire process has come at a very high speed. Small investors just could not cope with the speed in this lockdown period.  With no newspapers, magazine or postal letters, everything is left to digital world. There is no public transport and no access to cheque books etc.

Many shareholders are likely to miss the deadline for investment. We have been receiving several complaints and grievances from small shareholders.

Please take care of Small shareholders; those who are holding shares valued at less than 2 lakhs as on the record date. The closing date for the issue may be extended. Alternatively a new and unique suggestion may be looked into and implemented. Keeping in mind the objective of putting the funds already collected to good corporate purposes at the earliest, you may allow further time for this segment alone. In essence the scheme for mitigating the difficulties of small investors and senior citizens who cannot move out in the lockdown and are also not tech-savvy, shall work as follows:

1.      Complete the process of allotment against the rights issue as per schedule.

2.      Small shareholders be given preference for allotment of additional shares so that they are not crushed under the financial muscle power of persons with deep pockets.

3.      For allotment of additional shares, the proportionate allotment should start after first allotting 100 shares to all the shareholders who have applied for additional shares.

4.      Small shareholders who could not participate in the rights issue should be given an option to participate and subscribe for their rights up to a further period of 3 months. To enable this, the promoters should give the shares  from their holding, since in any case, the promoters  would have benefited by allotment of additional shares out of such unsubscribed portion.

5.      There are many shareholders who do not have Demat account. They are not  allowed to renounce their holding. This is absurd and robbing them of their valuable property. A female investor complained that she holds the shares in her maiden for which no Demat account was ever opened. She wanted to apply in her married name but is not able to do since she is not allowed to ‘Renounce’ her rights.

You are requested to please take immediate  action to protect the interest of small shareholders and oblige.

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

ACCELYA SOLUTIONS INDIA LIMITED. Open Offer

SMALL INVESTORS’ WELFARE ASSOCIATION

Regn No. F-72744 (M)

With a legacy of 25 years of investor protection services

TEXT OF LETTER WRITTEN TO SEBI

We have studied the above  DLOO and wish to point out the following anomalies/ apparent errors for your suitable corrective action:

1.     The offer has been triggered by the acquirer acquiring the series  holding co to reach down to level 6 and get hold of 74.66% shares of the target company. As per DLOO Acquirer acquired 

                         i.         Accelya Topco Limited which  holds 100% of the issued share capital of

                       ii.         Accelya Holdco Limited,  which in turn holds 100% share capital of

                      iii.         Accelya Finco Limited holding  100% share capital of

                      iv.         Accelya Midco Limited which in turn holds 100% of the capital of

                       v.         Accelya Bidco Limited. Which holds 100% of the capital of 

                      vi.         Accelya Holding World S.L.U. which in turn holds 11,143,295 equity shares in the Target Company constituting 74.66% of the total issued, paid-up voting share capital of the Target Company.

The offer for balance number of shares will bring the public holding to below the permitted level.

2.    The main/sole objective of such acquisition appears to be the ultimate acquisition of shares of the target co. It has not been clarified if these series of holding companies were holding any other assets.

3.    As per Regulation 5(2)  where the assets etc. of the target company is more than 80% of the consolidated assets, indirect acquisition will be taken as direct acquisition. It has not been clarified in the DLOO that this condition has been tested and holds true.

4.    It has been confirmed in on page 31 of the DLOO in note (2) that conditions of Regulation 8(5) is attracted since the assets etc. of the target company are more than 15% of the consolidated assets.  Regulation 8(5) is applicable only if Regulation 5(2) is attracted  when assets etc. of the target company is more than 80% of the consolidated assets. The following points arise:

                    i.        When the assets are already above 80% what is the purpose of specifying a  lower limit of 15% in u/r 8(5)?

                   ii.        Why it has not been stated in the DLOO that the assets etc. of the target company are more than 80% of the consolidated assets

5.    At page 31 at para 5.1.5, S.No.A, under the heading highest negotiated price, it is written “ Not applicable”. This is not correct. Why such price is not given?

The offer is likely to result in Public holding falling below 25% (DLOO page 6, para 5) yet there is no mention of acquirer’s plan to meet the stipulated level of public holding or to  delist.