Investors wary of Vedanta delisting
MUMBAI:Vedanta Resources Ltd’s (VRL) proposed delisting of Vedanta Ltd at an offer price of ₹87.50 a share may not be attractive, said a section of public minority shareholders, requesting anonymity. The delisting process requires a majority of public shareholders to vote in favour of the special resolution, or at least twice the number of votes cast against it.
Domestic institutional investors, who make up a little less than half of Vedanta’s public shareholding at 49.48%, said the price was too low and does not reward investors. The biggest institutional shareholders include ICICI Prudential Mutual Fund (5.03%), HDFC Trustee Co. Ltd (2.47%), SBI Mutual Fund (1.12%) and Life Insurance Corp. of India (6.37%).
An email sent to Vedanta seeking comments was not answered.
“LIC will not agree to tender shares at the price offered by Vedanta. It is a bit too low. As such, a large shareholder like LIC has been with Vedanta for a long time and there has to be some reward for such investors when the company desires to delist. We can’t say about other institutional investors, but on May 29, when it comes up for voting, LIC will not vote in favour of delisting at this price even though the floor price was discovered as per the delisting pricing formula prescribed by the Sebi,” said a person aware of LIC’s plans.
On May 18, Vedanta’s board had approved the delisting and said that it would seek shareholders’ approval for the proposal through a special resolution via postal ballot and e-voting.
While the indicative offer price was set at ₹87.50, the final discovered price will be based on the bids by investors. The delisting will be determined via a reverse book building process. The price at which Vedanta Resources can acquire public shares to take its own stake to at least 90% of the paid-up capital will be the discovered price. Vedanta Resources can then decide whether it wishes to delist or not.
“At ₹87.50, we will not tender our shares. We don’t have an objection to the delisting even if it is coming at a bad time. However, the floor price is extremely opportunistic,” said a fund manager who is also a public shareholder of Vedanta.