VEDANTA DIVIDEND UPDATE

Late last night again after 10 pm, Vedanta informed the Stock exchange that their Board is meeting on 24th October 2020 to consider first  Interim Dividend.  The calculation shows that Vedanta received Rs. 4526 in May and  Rs. 5843 crores it will get in October total Rs.10369 crores divided by  37 1.72 crores issued number of shares, the dividend per share from Vedanta  can be as high as 27.90  just on distribution of Hindustan Zinc dividend.

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.

Delisting Counter Offer- should be fair to investors as well-Vedanta

Re. VERY URGENT AND IMMEDIATE PLEASE. Delisting Regulation- Vedanta

The apprehensions as expressed in my letters dated 4^th July and 2^nd July 2020, all came true. The massive delisting exercise, the biggest ever in the country is failing. This I feel also a failure of the SEBI Regulations to keep pace with the evolving situation.

Majority of the investors in the share market do not have such a long term vision or appetite as LIC . Many small investors are staring at a massive loss of their wealth. The share price of Vedanta has already slipped down from 140 to 112 and it's likely to go down further.

The counter offer process as it stands now, is unfair to the small shareholders. While the promoters get the second chance to revise their offer upwards, the shareholders do not get the chance to revise their bid downwards. A fair second chance should be given to both.

SEBI should allow counter offer to the Vedanta  promoter in case they are  willing to do so. The Delisting exercise was just a touch and go affair with numbers showing under 137 crores shares received, yet with confirmed bids the book  fell short of 134 crs. While you should investigate the reason for this mismatch and take appropriate action, you should permit the promoters to make a counter offer.

I have, in the past also, suggested that for allowing the counter offer, the crossing of threshold of 90% should not be made compulsory. As a matter of fact, the “discovered price” is not defined anywhere in the regulation and in the past it was taken as the price at which highest number of shares were offered(Alfa Laval delisting). It is against the interest of the small shareholders who are not given a second chance to revise their bids  lower.  The counter  offer  will give them this much demanded second chance.

VEDANTA DELISTING- Ground check

Now that the investors have got all kinds of GYAN about valuation and the likely exit price, it is time to do some ground check.  The price of 150 or 200 or 300 investors will be able to get only if the promoters are able to cross the  threshold of 90% i.e. they get a minimum of 134.78 Crs. shares in the offer. Every investor must ensure that he participates in the offer at whatever price he feels he deserves, be it 100 or 1000, but participate he must. What are the hurdles? Just ensure that:

1.       All your shares are free- if they had been pledged, get them unpledged immediately.

2.       Check with your broker; the cut-off time. Some brokers do not accept the tendering requests on the last date. Some others have a cut-off time of 10.30 am on the last date.

3.       The success of the offer depends upon LIC. If you want to be aware of LIC’s bidding, check for the bid size of 23.66 crs.

4.       The bidding details can be viewed on the link given below:   

https://www.bseindia.com/markets/publicIssues/BSEBidDetails_ACQ.aspx?flag=ec&Scripcode=5255

The top right corner shows the last time when the page was updated. Please refresh regularly.

ACCELYA OFFER OPENING ON 5 OCTOBER 2020, CASE FILED

Further to my post of Saturday, September 26, 2020, I am happy to inform that I have filed an appeal in SAT on 28 September 2020 seeking  additional interest of Rs. Rs.63.21 being further Interest @10% per annum for the additional  period of delay of 224  days.  There is a delay of 270 days in the offer but the acquirer is paying interest for only 46 days.  All investors should pray and hope for justice from SAT.

 It is clarified that the offer will not be delayed. Investors will be able to tender their shares, they will either get Rs.1042.99 the original offered price; in case we are successful and  SAT sets to correct the mistake of SEBI and directs for payment of additional interest, investors will get RS.1106.20 per share

VEDANTA DELISTING-- what price?

Vedanta  PA was announced today. Anil Agarwal has now climbed the conveyor belt with no stop button. RBB opens on Monday October 5 and closes Friday October 9. Deadline for counter-offer is Tuesday October 13. 

 The million dollar question is: Will the delisting be successful ?

What price?

Straight acceptance like Hexaware ? or

AA make  counter offer ?

 The biggest joker in the pack is LIC, holding 6.37% of the issued capital. Without their participation, it is highly unlikely that the delisting offer will sail through. Analysing their purchases, it appears that they may have purchased almost half their holding or 15.35 Crore shares at around Rs. 250 or thereabouts, in the quarter ending 30/6/17 (price at opening of the quarter was around Rs. 269 and closing of the quarter was around Rs. 249), it is highly unlikely that their average cost of all their purchases would be less than Rs. 175. Will they submit a bid at less than that? Merchant banker friends tell me that LIC do not offer shares below the cost . On the other hand they add some amount of interest as well at a very low rate, may be 5-6%.

 

Vedanta won an award of  $ 499 Mn against Govt of India in Supreme Court just two weeks back.  Huge impairment was taken in Q4 results based on then prevailing price of  crude oil at around $ 20, it is now $ 40. Pricing of some of its key products have corrected favourably since the delisting was announced. All these, point towards a brighter future for Vedanta and hence perhaps a greater appetite of Vedanta promoters to make the delisting successful. S&P has already stated that delisting of Vedanta will be a positive for ratings of the parent UK company making the delisting offer, another reason for Anil Agarwal not to baulk at the discovered price. 

 

Question therefore is that beyond the $ 3.15 Bn already raised (Rs. 128 per share of Vedanta), where is the money ? The only source of additional funding for the promoter company for delisting is the dividend from Vedanta Ltd, which has given dividend in FY 20 significantly below its dividend policy. Obviously, they are waiting for delisting though reason given was the pandemic. Anil Agarwal publicly labels the dividend paid on  49%+ public shareholding of Vedanta as “a leakage”.

 

HZL is readying its war chest to pay a massive dividend to Vedanta Ltd which in turn will pay a massive dividend to the UK parent post the delisting. Crisil ratings have already been obtained for 15,500 Cr of borrowing. HZL Committee of Directors last Thursday- 22.09.20, approved a Rs 5000 Cr NCD issue, including greenshoe. Together with the 20,000 Cr cash it is already sitting on, they could give a dividend of Rs 35,500 Cr from HZL. This comes to a dividend of Rs 84 per share from HZL to Vedanta. If this 35,500 Cr  dividend is supplemented by about Rs 15,000 Cr cash & existing borrowings available with Vedanta, that makes it  50,500 Cr dividend possibility. Post delisting, Vedanta may pay this as a dividend of Rs 136 per share. This would hugely supplement the firepower for the promoters to make a sweet deal for delisting, far beyond the Rs. 128 per Share that the $ 3.15 Bn indicates. The market knows this and may therefore not be willing to tender below Rs. 200. 

This delisting is of strategic importance to Mr. Agarwal's future plans for many reasons, will he let it go for Rs. 25 per share ? Or Rs. 50 per share ? This may be his only shot, he may not even make a counter-offer. We expect the delisting to be between Rs. 175 and Rs. 200 per share. But then never underestimate AA.

ACCELYA Open offer - Full Interest must be paid

 SMALL INVESTORS’ WELFARE ASSOCIATION

    Email : SirenBajao@gmail.com 

TEXT OF LETTER SENT TO SEBI

The interest being offered is 12.99  instead of about Rs.70 for the delay of about 8 months caused by the acquire

This interest is only for the period of 46 days gap between the PA date and the DPS date as was given in the DLOO. They have not included any interest for the period of delay caused by their action. This is absolutely wrong and incorrect.  The offer is delayed for about 8 months for which they are solely responsible and must pay interest for this period. The interest for the period of delay has always been given to the investors by the acquirers.  This has been  the practice all along.

I would like to believe that it is the failure of the merchant banker at the first stage  to guide the client- Acquirer to offer full interest. 

Interest has not been provided for the period of litigation on the premise that such delay was before the issuance of OBSERVATION LETTER.

The term "Observation letter" is nowhere mentioned in SEBI regulations. This is a term which has cropped up during the processing and use. In asking an acquirer to pay interest, the idea is that the investors should not suffer because of intentional or unintentional delay due to the acquirer's action. At the same time, the time the acquirer should not suffer for the delay and taken for processing at SEBI's end. Therefore, it is assumed that SEBI has taken the time till observation letter is issued and  delay beyond the date of the  observation letter shall always bear interest. 

For the period of  litigation, especially started by the acquirer, they always had have to pay interest. This was the case in FEDERAL MOGIUL or other long delayed cases of NIRMA- SHREE RAMA MULTI-TECH or PRAMOD JAIN-GOLDEN TOBACCO. Admittedly, all these litigations were started  after the issuance of OBSERVATION LETTER. 

In the case of Accelya, the acquirers started   litigation even before the issuance of the observation letter. This cannot spare them the responsibility and liability to bear with the consequences of litigation started by them.   If this is allowed unchecked, it may open the flood gates of litigation, may be just to delay the payment against the offer.

I have no hesitation in urging SEBI strongly, to direct the acquirer to pay interest for the delay caused by their  avoidable litigation. The least you can ask is to pay interest for the period between 14.2.20 ( the date when SEBI appointed the Valuer) to 17.07.20, the date of SAT order. There cannot any dispute or argument that this period of delay was caused absolutely by the Acquirer.