Anil Agarwal Plans To Buy Rs 16,200-Crore Vedanta Stake To Take It Private

Vedanta Resources Ltd. has agreed to buy the entire public shareholding of its listed subsidiary Vedanta Ltd. and take it private.

The billionaire Anil Agarwal-led company informed the exchanges today that it would acquire Vedanta at Rs 87.5 per share—a 2 percent discount to its closing market price of Rs 89.3 on Tuesday.

As on date, public shareholders hold nearly 169.1 crore equity shares of Vedanta aggregating to 48.94 percent of Vedanta’s paid-up equity share capital. The public shareholding increases to 185.3 crore shares—or 49.86 percent stake—after including the company’s American depository receipts, which Vedanta Resources would buy for around Rs 16,218 crore.

Vedanta Resources also said it would voluntarily delist Vedanta from the BSE and NSE Ltd. as well as its American depository receipts from the New York Stock Exchange.

Presently, Vedanta has cash reserves of around Rs 12,264 crore, which includes cash from subsidiaries but not joint ventures like Hindustan Zinc Ltd., Hindustan Zinc International Ltd. and Balco.

This doesn’t include dividend from Hindustan Zinc, which may be announced soon. The board meeting for declaration of this dividend was scheduled to be held today.

The company has cash amounting to Rs 35, 000 crore, which includes Hindustan Zinc and its subsidiary along with its joint venture in Balco as on Dec. 31, 2019, according to company filings. It has net debt of Rs 58,500 crore.

What’s Behind This Move?

Vedanta’s delisting, according to the group, aids its corporate simplification process and provide it with “enhanced operational and financial flexibility in a capital intensive business”.

The group has over the years, merged Sterlite with Sesa Goa to form Sesa-Sterlite in 2012, Cairn India with Vedanta Ltd. in 2016 and delisted Vedanta Resources in 2018.

Implications For Shareholders

The proposed delisting, according to the exchange filing, will offer Vedanta Ltd.’s public shareholders an opportunity to realise immediate and certain value for their shares at a time of elevated market volatility.

The delisting will be determined in accordance with the reverse book building mechanism— a process used for efficient price discovery—according to delisting regulations.

Phillip Capital termed this deal surprising as it comes at a time of depleted cash flows and tight finances. The indicative price, according to the brokerage, is attractive assuming recovery in FY22.

With this deal, Vedanta Resources will have more cash flows for meeting it debt obligation and Hindustan Zinc, the group’s cash cow, won’t have to share its dividend with minority shareholders since Vedanta Ltd has only 51 percent stake in the subsidary, the brokerage said.