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Vedanta Delisting: Unconfirmed Bids, Glitches May Result In Vedanta Delisting Failure

Anil Agarwal - led Vedanta Ltd.’s delisting process has seen a change in fortune in the late evening hours.

Anil Agarwal, billionaire and chairman of Vedanta Resources Plc in London, U.K. (Photographer: Simon Dawson/Bloomberg)
Anil Agarwal, billionaire and chairman of Vedanta Resources Plc in London, U.K. (Photographer: Simon Dawson/Bloomberg)

Oct. 10 Update: Vedanta delisting offer fails. Read more here.


The delisting of Anil Agarwal - led Vedanta Ltd. saw a turn in fortune in the late evening hours of Oct. 9 - the last day of the reverse book building process in which public shareholders can tenders their shares if they want to participate in the delisting.

At about 3:30 p.m. the metals major looked set to receive more than the 134.12 crore shares it needed for its promoter to cross the 90% threshold required for a successful delisting.

At that time, public shareholders had tendered 137.1 crore of the total 169.73 crore shares held by them, though some bids were pending confirmation from custodians.

The bidding was to have closed at the end of market hours, but due to glitches earlier in the day, on account of which some shareholders reportedly faced trouble in tendering shares, the Bombay Stock Exchange extended the bidding till 7 p.m.

By 7:35 p.m., the BSE website showed that only 125.47 crore shares were confirmed to be tendered and bids worth 12.31 crore shares were yet to be confirmed. The reasons for why they remain unconfirmed are yet to be clear.

Bankers to the delisting offer have requested securities regulator SEBI for a one-day extension, on grounds that glitches in the exchange tendering webpage hurt participation, according to one official close to the process who didn't want to be named.

It's not yet known if SEBI will grant that extension and if it will be adequate for the delisting process to achieve the 90% threshold.

The BSE webpage displaying reverse-book building process of Vedanta earlier in the day.
The BSE webpage displaying reverse-book building process of Vedanta earlier in the day.


SHARES NEEDED
No. of fully paid up equity shares (excl ADS): 356,10,08,835
90% of that: 320,49,07951
Promoters have: 186,36,18,788
They need additional: 134,12,89163
Total shares with public: 169,73,90,047

THE PRICE
Floor price/Indicative offer price: Rs 87.25/share
Discovered price: Yet to be announced
Counter offer price: If promoters choose to make one
Exit price: Price at which 90% shareholding is achieved

Delisting offer size (at discovered price): 134,12,89163 shares x Discovered price


The success of the delisting offer, the first phase, hinges on participation of institutional shareholders such as foreign portfolio investors with 65.90 crore shares (18.51%), mutual funds with 31.63 crore shares (8.88%) and LIC.

As of a June filing, the Life Insurance Corporation owned 23.67 crore Vedanta shares amounting to a 6.37% stake. That is said to have reduced as the total financial institutional holding stood reduced to 5.89% as on Sept. 25. Retail shareholders own 7.56% or 26.91 crore shares.

What Happens Now?

90% Threshold
If the reverse book building process is not extended, then as per the last available data Vedanta Resources Ltd., the parent company making the delisting offer, will have insufficient shares to cross the 90% shareholding threshold and the delisting will have failed.

If an extension is given, at the end of which atleast 134.12 crore shares are tendered in confirmed bids, then VRL will have succeeded in the first phase of the process.

After that price will come into play.

Counter Offer
The price at which VRL can reach 90% shareholding is the discovered price in a reverse book building process.

The promoter group could then

  • accept the discovered price
  • make a counter offer


A counter offer price is lower than the discovered price but not less than the book value of the company.

The last date for announcement of a counter offer is Oct. 13. Shareholders will then have an opportunity to tender their shares, or not, at that price. Participation is open to all public shareholders irrespective of whether they participated in the reverse book building process.

If, via the counter offer, the promoters are able to reach 90% shareholding, then the delisting will have completed the second, most critical phase. If they fail to reach 90% shareholding the delisting offer will have failed.

Exit Price
The price at which 90% shareholding is achieved -- whether it’s the discovered price, if accepted by the promoters, or a counter offer price -- will be deemed the exit price.

The last date to announce this price, and the acceptance level, is Oct. 16.

The promoters are required to purchase all shares offered at this price. Payment to all shareholders who tender their shares at that price will have to be made by Oct. 23.

That’s also the date by which all shares have to be returned in case the delisting offer fails.

Note: The number of shares needed for the offer to succeed may vary depending on if ADS conversion to underlying shares takes place. American Depositary Share holders include promoter and public and total 26.26 crore shares. VRL seeks to also delist the ADS.