The plan of Vedanta promoters to delist the metals and mining company from the Indian bourses will become costlier by Rs 4,000 crore at the current market price. The promoters of the Anil Agarwal-led company initially planned to buy out the shares of public at a cost of Rs 16,000 crore, but the share price rise post the offer indicates that they will have to shell out Rs 20,000 crore.
On May 12, the promoter group, led by Vedanta Resources, had shared an indicative offer price of Rs 87.5 a share for delisting. But the share price went up 28 per cent to Rs 112 after the offer. According to a Motilal Oswal report, the offer price is 41 per cent discount to the FY20 book value per share.
Vedanta group, including the parent Vedanta Resources, Hindustan Zinc and Cairn India, is burdened with a debt of $10 billion. But Chairman Anil Agarwal recently said that there is no worry on repayment as the group never defaulted on any of its payments. The group has $14 billion of revenue, $3.2 billion profit and $1.2 billion cash, he said. However, another report says that Vedanta is in discussion to raise $2.75 billion for the delisting payments. The group's business in zinc, aluminum and oil and gas have been buffeted by weak demand and volatile prices.
Motilal Oswal report said metal prices have bottomed out, and they have factored marginal recovery from current levels in FY22. Vedanta's cost reduction in aluminum, the completion of capacity expansion in zinc, and expected ramp-up in oil and gas are expected to drive earnings growth in FY22, negating the impact of weak commodity prices. The brokerage values its shares at Rs 114, built on the expectation of a volume uptick in the zinc and oil and gas businesses as well as 5-10 per cent higher commodity prices than currently prevailing.
In this context, the offer price discovery is likely to happen at a higher level. As ensuing steps, the company will announce a reverse book building process for shareholders to tender the shares, resulting in the discovery of the final exit offer price.
"Upon the discovery of the final exit offer price, the promoter group would have the option to either accept or reject the final exit offer price. In case the final exit offer price is not acceptable to the promoter group, it could make a counter-offer within two working days from the discovery of the final exit offer price," the report said.
In a special resolution by postal ballot, 93.3 per cent of all shareholders and 84.3 per cent of public shareholders have voted for the delisting.
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