After a failed delisting bid earlier this year, promoters of Vedanta Limited are now looking to increase their stake by 5% in the commodities major through an accelerated bookbuild purchase of equity shares from Qualified Institutional Buyers (QIB). Anil Agarwal-led Vedanta’s promoters are now looking to buy equity shares at a price of Rs 150-160 per share, a premium to yesterday’s closing price. The move comes months after the promoters tried to delist the firm at a heavy discount. On Thursday, shares of the firm surged 13% to trade at a high of Rs 170.5 apiece.
“There is value in the company. Even during the delisting people were talking about not selling below Rs 300. So, the company would have realised that whoever wants to sell it is better to buy now because they are bullish on the business,” Abhimanyu Sofat, Head of Research, IIFL Securities told Financial Express Online. He adds that the move made by the promoters to increase their stake shows that they are confident about the future prospects of the company.
Move to aid future delisting?
At the end of the September quarter, the promoter group of Vedanta held a 50.14% stake in the mining major, which is likely to increase to nearly 55% after the share purchase is complete. Some argue that this may help the promoter group pave their way towards a future delisting after the one-year cooling-off period. The transaction would cost Anil Agarwal Rs 2,960 crore at the upper end of the offer price range.
However, Sofat feels otherwise. “It is not that easy, as they need 90% on their side to delist,” he said. “Unless they get Life Insurance Corporation (LIC) on board, which was a problem last time, it will be speculative,” Sofat added. Keeping in mind the commodity cycle, Abhimanyu Sofat said that Vedanta Limited is a decent stock to own.
Promoter may increase stake further
“In a financial year, current regulations allow promoter to buy 5% stake without any specific approval,” Hemang Jani, Head Equity Strategist – Broking & Distribution at Motilal Oswal Financial Services told Financial Express Online. He added that Vedanta’s promoter could again go for another 5% stake hike in the next financial year. Jani, added that Vedanta’s promoter may have realised that during the delisting process many shareholders were ready to sell shares above Rs 150 per share.
Shares of the firm have galloped from Rs 98 per share in October, just after the delisting process failed to now trade at Rs 170, a 73% jump in a little over two months. Vedanta’s aluminium production in November was stable while silver production was up 14% on-year basis. “. In our view, the company is likely to benefit from uptick in silver production (at significantly higher realisation YoY). Besides, higher LME prices for Al & zinc and lower coal cost are likely to aid margin,” said brokerage and research firm Edelweiss with a ‘Buy’ rating on the scrip.