Vedanta Shares Rise 10% As Founders Look To Delist Firm. What It Means For Investors?

The proposed delisting is expected to offer Vedanta Ltd’s public shareholders an opportunity to realise immediate and certain value for their shares during the time when the markets are extremely volatile.

Representational Picture (AFP)

Mumbai, May 13: After billionaire Anil Agarwal owned Vedanta Ltd informed the stock exchanges that it wants to delist from the domestic exchanges, the company’s share price has jumped 10 per cent on Wednesday before parring the gains later in the day. The promoter group has offered to buy out all the public shareholders in the company at an indicative price Rs 87.50 per share, around 10 per cent higher than the stock’s closing price of Rs 79.60 on Tuesday. The shares of Vedanta rose 10 per cent to Rs98.20 apiece on the 30-benchmark Sensex on Wednesday. However, the company's share has fallen by more than 40 per cent this year. The promoter group, including Vedanta Resources, owns 50.14% of Vedanta Ltd and the remaining 49.48% is held by the public. The miners Indian unit’s delisting will provide Vedanta Resources, which owns a 36.8% stake in the unit, with enhanced operational and financial flexibility, as well as “transform” its credit profile, the holding company said. Vedanta Ltd’s top level executives have also resigned in the last two weeks. In March, Moody’s Investors Service has kept the rating of Vedanta’s parent company -- Vedanta Resources in review mode for downgrade noting that the company is affected by falling oil and metal prices besides subdued demand as a result of Covid-19 outbreak. In a statement, Moody's said it has changed the rating outlook for Vedanta to ratings under review from stable. What companies ideally do at the time of delisting? Typically when companies opt for delisting it may look to expand or restructure. In some cases the company may get acquired or the promoters want to raise their stake. When a company voluntarily delist, shareholders are offered a premium to the price at which the shares are being traded on the exchange. What it means to you as shareholder? The company has a promoter holding at around 50.14 per cent, while public shareholders held 49.46 per cent as per March-end shareholding data, according to reports. The proposed delisting is expected to offer Vedanta Ltd’s public shareholders an opportunity to realise immediate and certain value for their shares during the time when the markets are extremely volatile. As a pubic share holder does it mean that you will get Rs 87.5 per share you hold? Not really. A reverse book building will take place to determine prices.Vedanta Resources, the parent company, also went private in 2018. It will be a wait and watch how the Vedanta Resources will cough up the money as the company have lot of maturities due next year.