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A long but hopefully a helpful thread on #vedantadelisting.
@Dinesh_Sairam, @Vivek_Investor
#vedanta #investing #investors #stockmarket
@Dinesh_Sairam, @Vivek_Investor
#vedanta #investing #investors #stockmarket
1. One simple word for Vedanta’s promoters: ‘Opportunists’. The price per share of the co. used to be above Rs.200 few years back, but due to decline in the prices, weak demand n now of course, COVID-19 playing the spoilsport further. Now it is trading at Rs.135 odd per share.
2. Mind you, this is not some small cap or even mid cap company we are talking about. Here, the company in case is a NIFTY stock! Yes, one of the top 50 companies. And it plans to delist from the bourses and the timing could not be better for the promoters.
3. What is Delisting? In delisting the company is taken off the stock exchange. Just the opposite of what happens in an IPO.
4. Reasons for delisting? (4-1 to 4-4)
4-1
‘With great power comes great responsibility’.
So, a listed entity has to take care of their large family of shareholders. So to say, there will be dilution of control and the management of the co. has to seek the approval of shareholders for almost all the major matters.
‘With great power comes great responsibility’.
So, a listed entity has to take care of their large family of shareholders. So to say, there will be dilution of control and the management of the co. has to seek the approval of shareholders for almost all the major matters.
4-2
• Need to borrow money above a specific limit, take the approval.
• Need to sell assets, take the approval.
• Need to declare dividend, oh yes, take the approval for this too!
• Need to borrow money above a specific limit, take the approval.
• Need to sell assets, take the approval.
• Need to declare dividend, oh yes, take the approval for this too!
4-3
You get the drill, right? Basically a public company has to pass resolutions in the general meetings and also, there are hell lots of compliance of SEBI (Securities and Exchange Board of India) too.
You get the drill, right? Basically a public company has to pass resolutions in the general meetings and also, there are hell lots of compliance of SEBI (Securities and Exchange Board of India) too.
4-4
So, to conclude, Delisting would lead to simplification of all the administrative procedures that would have been there if the company is listed.
So, to conclude, Delisting would lead to simplification of all the administrative procedures that would have been there if the company is listed.
5. But why now? (5-1 to 5-2)
5-1
It is no rocket science to observe that the share price has tumbled because of the ongoing Covid pandemic. ‘Delisting’ now would mean lesser money would be required to pay off the shareholders and buy their stake.
It is no rocket science to observe that the share price has tumbled because of the ongoing Covid pandemic. ‘Delisting’ now would mean lesser money would be required to pay off the shareholders and buy their stake.
5-2
“ Covid 19 has had a serious impact on the metals industry, n Anil Agarwal is taking this opportunity to take co. pvt, that will provide his co., more operational and financial flexibility in a capitalintensive business,” said Aamar Deo Singh, Head Advisory at Angel Broking.
“ Covid 19 has had a serious impact on the metals industry, n Anil Agarwal is taking this opportunity to take co. pvt, that will provide his co., more operational and financial flexibility in a capitalintensive business,” said Aamar Deo Singh, Head Advisory at Angel Broking.
6. Understanding the timeline (6-1 to 6-5)
6-1
October 5 to October 9
The bidding process will take place, where the shareholders can tender their bids. This must take the promoter’s stake to 90% for delisting to be successful.
October 5 to October 9
The bidding process will take place, where the shareholders can tender their bids. This must take the promoter’s stake to 90% for delisting to be successful.
6-2
October 11
Then there will be discovery of ‘exit price’, the price at which the shares are offered.
October 11
Then there will be discovery of ‘exit price’, the price at which the shares are offered.
6-3
October 13
In case the final price is not accepted by the promoters, they may come up with counter offer in 2 days.
October 13
In case the final price is not accepted by the promoters, they may come up with counter offer in 2 days.
6-4
October 16
The promoters to announce the success/failure of delisting.
October 16
The promoters to announce the success/failure of delisting.
6-5
October 23
If delisting is successful, promoters will have to pay in 10 days the amount to shareholders who tendered their shares.
October 23
If delisting is successful, promoters will have to pay in 10 days the amount to shareholders who tendered their shares.
7. About retail shareholders (7-1 to 7-3)
7-1
With just 8% stake, Retail shareholders have a little say in the entire delisting process.
With just 8% stake, Retail shareholders have a little say in the entire delisting process.
7-2
But please remember, if you are a retail shareholder and you did not tender your shares in the delisting process, then too you have time of 1 year to tender the shares at the delisting price to the promoters.
But please remember, if you are a retail shareholder and you did not tender your shares in the delisting process, then too you have time of 1 year to tender the shares at the delisting price to the promoters.
7-3
But after that, your shares will be illiquid, meaning you can not sell them as the company is delisted.
But after that, your shares will be illiquid, meaning you can not sell them as the company is delisted.
8. What should a retail shareholder do?
If you are a retail shareholder, you must hold the shares and not tender them for delisting.
If you are a retail shareholder, you must hold the shares and not tender them for delisting.
9. What are the benefits if a retail shareholder does not tender the shares? (9-1 to 9-4)
9-1
You can still sell the shares in a span of 1 year to the promoters at the delisted price.
You can still sell the shares in a span of 1 year to the promoters at the delisted price.
9-2
You can get dividend if the co. declares any. The co. has declared div. of Rs.19.45, Rs.21.20, Rs.18.85 per share in FY 17, 18 and 19 respectively.
You can get dividend if the co. declares any. The co. has declared div. of Rs.19.45, Rs.21.20, Rs.18.85 per share in FY 17, 18 and 19 respectively.
9-3
But for FY 20, it declared div. of only Rs. 3.9 per share. That’s because probably, the promoters want to declare dividend after delisting. That way, they can get all the money of dividend.
But for FY 20, it declared div. of only Rs. 3.9 per share. That’s because probably, the promoters want to declare dividend after delisting. That way, they can get all the money of dividend.
9-4
If delisting is not successful, you can still sell the shares through stock exchange. So it is a win-win in all the cases.
If delisting is not successful, you can still sell the shares through stock exchange. So it is a win-win in all the cases.
10. The End.
