Vedanta Moves SEBI To Get Nod To Start Reverse Book Building For Delisting
Signage for Vedanta Resources Ltd. is displayed at the company’s office building in Mumbai, India. (Photographer: Kanishka Sonthalia/Bloomberg)

Vedanta Moves SEBI To Get Nod To Start Reverse Book Building For Delisting

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After mobilising $3.15 billion to fund the delisting of its Indian subsidiary, Vedanta Resources Ltd. has approached the Securities and Exchange Board of India for necessary approvals to start the reverse book building process, sources in the know of the development said.

The company had in May announced plans to delist Vedanta Ltd. from the Indian stock exchanges by buying out non-promoter shareholding.

Sources said the firm is expecting to receive SEBI approvals by early next week, post which it will launch reverse book building and invite bids from public shareholders.

The reverse book building process is likely to be open for five days and will allow public shareholders to effectively discover the price for the delisting.

The 'final exit offer price' will be the price at which equity shares, accepted through eligible bids, will take the shareholding of Vedanta Resources to at least 90% of the paid-up equity share capital of Vedanta Ltd.

The public shareholding in Vedanta Ltd. is currently at 49.49% or 183.98 crore shares.

"Vedanta Resources is looking to complete the entire exercise in the next 2-3 weeks," the source said.

When contacted, a Vedanta spokesperson said that the company is working to take all "necessary approvals" for the reverse book building but refused to comment any further.

When Vedanta had announced its intention to voluntarily delist its Indian subsidiary in May 2020, it set an indicative floor price of Rs 87.5 per share.

While the indicative floor price led to some skepticism, Vedanta Resources has since then mobilised $3.15 billion to fund the delisting -- $1.75 billion from banks for a 3-month term loan facility and another $1.4 billion from 3 year-amortising bonds.

Basis the outstanding public shareholding, if Vedanta Resources utilises the entire amount of $3.15 billion, it can now pay a maximum delisting price of up to Rs 128 per share.

"At Rs 125, the price will be more than double from the 52-week low of Rs 60.30 of March 30, 2020 and a premium of Rs 37.5 per share or nearly 43% from the indicative floor price of Rs 87.5," the source said, adding this is the best offer in the current scenario.

Also read: Vedanta Wins Case Against India for $499 Million Award Claim

Sources said all financing options have been exhausted by the promoter and there is no other avenue of fundraising.

Debt financing at Hindustan Zinc or Vedanta Ltd. is not available to Vedanta Resources for the purpose of delisting while the three-year bonds, which have been priced at 13% dollar-denominated yield, reflect the severe constraints in the availability of financing for the proposed delisting, they said.

Also read: A Delisting Spree in India Has Investors Betting Who’ll Be Next

On the other hand, delisting in the price band of Rs 125 to 128 per share offers a good opportunity for public shareholders to realise immediate and 100% cash value amid volatile and uncertain markets. The price of Rs 125-128 per share is also at a hefty premium of the share's book value of Rs 89.38 as on March 31, 2020.

The outlook for the commodity cycle remains uncertain and hazy. The proposed transaction eliminates the potential impact of future balance sheet risks for current public shareholders, sources added.

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