DELISTING – SHORT CHANGING MINORITY SHAREHOLDERS

Eight years ago, our Editor, Mr.SP Tulsian had written very blunt and succinctly that Vedanta group is using India as dumping ground, to de-leverage its balance sheet and get rid of loss making units. He has explained in detail how it has tried to create a mega Indian entity, to create a war chest, to acquire residual stake of 29.5% in Hind Zinc and 49% stake in BALCO by leveraging annual cash profit.

And Vedanta continues to remain the opportunist that it has always has been.

Delisting per se, is not a no-no. It’s the decision of the management and something which minority shareholders have to always be prepared for. But here, the timing of the delisting reeks of a complete sense of selfishness, a sense of short changing the shareholders – that’s what a delisting at this time speaks about.

The moot point for delisting, like for a buyback is all about the pricing because ultimately for the shareholder, even while exiting it should be worthwhile. So usually, promoters do not go for delisting when the markets and moods are down and there is widescale value destruction. But unmindful of these facts, Vedanta is going ahead with a price which does not show the true value of its business. Today, the stock is quoted at Rs.98 levels. Its 52-week high, hit almost a year ago, 26^th June to be precise, was at Rs.179.95.

Vedanta has offered an exit price of Rs.87.50, which is the lowest indicative price under the reverse book building process and much lower than the current price too. It is actually much closer to its 52-week low at Rs.60.30 than the high. Worse still, it holds 65% stake in Hindustan Zinc which itself is today valued at Rs.174/share. And book value of Vedanta as end of September stood at Rs.178.

So why the hurry to delist now? Obviously for the promoters, this is the most opportune time when all chips are down. In any delisting, minority shareholders always expect that the exit price will be at a significant premium to the existing price and at least reflects the true replacement value. Just as these are extraordinary times for the promoters, they are extraordinary times for the shareholders too.

SEBI needs to step in and make note of this. Adani Power too announced its plans to delist and analysts expect that there could be more who will blatantly care two hoots for the shareholders and go for delisting at much lower values. Maybe SEBI needs to hike the threshold to 80-90% public shareholding votes in these ‘extraordinary’ times. Anil Singhvi, Founder, IIAS has gone so far as to suggest that SEBI should suspend delisting itself given the low prices.

Whether SEBI acts or not, we as retail investors do have the right to not tender our shares at the current price. As per the current shareholding pattern, 49.48% stake is held by the public, which includes retail, institutional and FIIs too. Lack of participation might force the company to revisit the price and arrive at a more realistic value. But if they don’t revise it? All can collectively offer the shares at a price exceeding Rs.150 and within Rs.180. Maybe this is the time to show the unity of minority shareholders, which in itself will be extraordinary.