Proxy Firm Questions If Hoax Bids Led To Vedanta’s Delisting Failure

Vedanta Ltd.’s delisting failed as 12.3 crore shares offered were deemed invalid bids by custodians. And these remained unconfirmed despite a four-hour extension. According to proxy advisory firm SES, that raises a question if these bids were real and backed by shares or hoax bids to give a false sense that the required 90% threshold had been met.

The Securities and Exchange Board of India must call for data and examine who placed these bids and why they remained unconfirmed, Stakeholders Empowerment Services said in a report. The answer, it said, will be crucial for other companies, namely Adani Power Ltd., Hexaware Technologies Ltd., Allcargo Logistics Ltd., which are also queued up for delisting from the exchanges.

Vedanta’s reverse book-building process for public shareholders to tender their shares had begun on Oct. 5 and concluded on Oct. 9. At 3:30 p.m. on Friday, 137.78 crore shares had been tendered by public shareholders, more than the 134.12 crore needed for the promoter to cross the requisite 90% shareholding threshold as per the delisting regulations. But, of these, only 125.47 crore worth of shares were confirmed.

Since the delisting failed, the equity shares, according to SEBI’s regulations, will need to be returned to shareholders within 10 days. This time period, SES said, must be shortened by the market regulator. Barring a few exceptions, all shares are held in dematerialised form.

For instance, more than 99% of public shares of Vedanta are held in demat form. Therefore, the report said, equity shares held in demat form must be returned the same day once the announcement of delisting failure is made.

SES has made another interesting observation in its report.

According to the bidding disclosures, 42 lakh equity shares had been tendered at a price of Rs 90 or less. Compare this to the low of Rs 110 that Vedanta’s share price hit during the tender period.

Unless the matter is investigated by the regulator, it is hard to justify such an unrealistic bid price, SES said.