Vedanta Promoters - checkmate of Bears

By Research Desk
about 4 months ago

Vedanta Ltd promoters have made a voluntary open offer, to acquire 10% of issued equity, at Rs. 160 per share, being 37.18 crore shares, for about Rs. 5,950 crore. This is a calculated move seen by the promoters, after having acquired 18.50 crore shares on 24-12-2020, at Rs. 160 per share, raising their stake to 55%. This open offer will give multiple message to the market, of allaying fear of liquidity crunch at the promoter end, promoter seen ready buyer at Rs. 160 per share, ability to raise any kind of money from the global markets in their personal capacity, as also, all verticals of the company are doing exceedingly well, thus expecting robust consolidated Q3 and Q4 numbers of FY21.

This open offer, therefore may just remain on paper, as no one will tender, when share rules at Rs.180. Alternatively, if promoters are able to raise even 0.10%, being 37.50 lakh shares, will result in promoters acquiring more than 5% in this Financial Year, which will trigger open offer of another 26% thereafter. But all these may just remain on paper, as over 30% stake is held by FIIs, LIC, MF etc, while about 5% are held by ADR Holders. These investors were unwilling to tender even at Rs. 240 per share, in failed delisting move attempt by the promoters in October 2020. So, no question of them showing any willingness to offer at Rs. 160.

So, this move is to send clear and loud message to Bears, of not to play dirty by floating negative news about Vedanta, in collusion with Media. This will now bruise and slaughter them more and will force them to cover their shorts. In January series, 7.50 crore shares have open interest, which implies that Bulls are holding longs and Bears are holding short of 7.50 cr. shares. Infact, this 7.50 cr shorts are seen rolled over from October series, which is giving a notional loss of Rs. 600 cr to Bears. These shorts are largely held by the institutional players, who were seen floating news of liquidity crunch, fund diversion, weak bias of ADR, leveraged promoters etc, and were making an unsuccessful attempt to bring down the share price of Vedanta Ltd. On last Friday, they also feared the market with Vedanta losing case of Konkola Copper Mines in Zambia.

In the near term, this will see share rising in the secondary market. Vedanta share price has already risen by over 100% from 12-10-20 (since Vedanta buy call given by us in BG Section of Member Zone) when delisting failed, while seen having good upside till January expiry and Q3 FY21 numbers are out. So, no need to worry for investors, as near and mid term view on the stock is not seen positive but bullish.

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