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The biggest institutional shareholders of Vedanta include ICICI Prudential Mutual Fund, HDFC Trustee Co. Ltd, SBI Mutual Fund and Life Insurance Corp. of India. (Bloomberg)
The biggest institutional shareholders of Vedanta include ICICI Prudential Mutual Fund, HDFC Trustee Co. Ltd, SBI Mutual Fund and Life Insurance Corp. of India. (Bloomberg)

Vedanta delisting faces small shareholder snag

  • The delisting process may not get votes of public minority shareholders
  • The delisting process needs a majority of the public shareholders to vote in favour of it

MUMBAI : Vedanta Resources Ltd’s (VRL) proposed delisting of Vedanta Ltd (Vedanta) 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 the 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 of Vedanta 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 on Wednesday was not answered till press time.

“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 29 May, when it comes up for voting, LIC will not vote in favour of delisting at this price even though the price will be discovered as per the delisting pricing formula prescribed by the Securities and Exchange Board of India (Sebi)," said a person aware of LIC’s plans.

On 18 May, 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. The price is already appreciated, trading above 90, but the proposed price is a steep discount of its historic five-year average," said a fund manager who is also a public shareholder of Vedanta. According to Amit Tandon, chief executive, Institutional Investor Advisory Services, the delisting could be in the interest of all stakeholders given the group’s history with minority shareholders.

“Cash flowing from the operating companies to the holding companies has been an element of concern for shareholders, and some of the transactions have taken investors by surprise. To that extent, delisting the company and allowing the promoter full rein is in the long-term interest of all stakeholders. That does not take away from the low price being offered. Investors need to take advantage of the regulatory protection and put in a bid that reflects the value of the company," he said.

jayshree.pyasi@livemint.com

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