Indian billionaire Gautam Adani plans to delist Adani Power Ltd from the stock exchanges, following in the footsteps of another billionaire, Vedanta Ltd’s Anil Agarwal.
Adani Power, a private-sector power generation and distribution company, informed stock exchanges on Friday that its board of directors will consider a proposal at its next meeting to voluntarily delist its shares. The proposal to buy out the company’s public float has come from promoter firm Adani Properties Pvt. Ltd.
On Wednesday, Mint reported that the Indian markets could see several delistings as depressed valuations made it attractive for promoters to take their companies private, which would make it easier for them to restructure, or turnaround the businesses without public scrutiny.
In the last 12 months, Adani Power’s share price has halved from a high of ₹73.75 to the current level of ₹36.40, making delisting by the promoter group an attractive and affordable option. At Friday’s closing price of ₹36.40, the delisting proposal would amount to about ₹3,513 crore.
As of March, 25.03% of the company was held by public shareholders, primarily by foreign portfolio investors and overseas corporate bodies.
Several Adani group companies are listed on the Indian stock exchanges. These include Adani Ports and Special Economic Zone Ltd, Adani Transmission Ltd, Adani Green Energy Ltd, Adani Gas Ltd, and Adani Enterprises Ltd, besides Adani Power.
Adani Power’s board is scheduled to meet on 3 June to consider the delisting proposal.
“Pursuant to the delisting proposal letter, the board of directors of the company have been requested to: (a) consider and approve the delisting proposal in accordance with the Securities and Exchange Board of India (Sebi) Delisting Regulations; (b) seek the requisite approvals for the delisting proposal, including from the shareholders of the company in accordance with the Sebi Delisting Regulations, the stock exchanges, any third parties, lenders or any other authority (as may be applicable; and (c) to take all such other actions as may be required to be undertaken by the company under the Sebi Delisting Regulations to give effect to the delisting proposal including appointment of merchant banker to undertake due diligence," the company said in an exchange filing.
Earlier this month, commodities major Vedanta Ltd had made a similar offer to its minority investors. According to media reports, United Spirits Ltd, which is owned by Diageo Plc., is also considering a similar proposal.
Recent changes to delisting norms made by the markets regulator allows the acquirer to make a counter offer if the price discovered under the reverse book building process is not acceptable. The regulator has also altered the reference date for computing the floor price of the delisting offer, ensuring that market speculation does not drive up the floor price and making delisting easier for the promoter.
Depressed valuations are now common across the equity market as a result of the lockdown imposed to check the spread of coronavirus and the uncertainty regarding the resumption of businesses, though this makes it attractive for the promoter to take the company private. However, the move may come at the detriment of minority shareholders.
Vedanta’s move to buy out publicly-held shares at an indicative price of ₹87.50 has not been received well by shareholders, especially as the stock price has tumbled more than 40% in the last six months.