The Vedanta Limited Delisting Fiasco
| Case Code: FINC176 Case Length: 12 Pages Period: 2020 Pub Date: 2021 Teaching Note: Available |
Price: Rs.250 Organization: Vedanta Limited Industry: Metals & Mining Countries: India Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
About Vedanta Limited
VL, a subsidiary of VRL, was started in June 1965 as Sesa Goa Private Limited (Refer to Exhibit I for VRL Structure). In April 1981, the company became a listed company and changed its name to Sesa Goa Limited. In September 2013, it changed its name to Sesa Sterlite Limited and again in April 2015 to VL..
Financial Position of Vl
On June 6, 2020, VL announced its financial results for the fourth quarter of the financial year 2020 (Q4FY20). It reported a fall in revenue from Rs. 230.92 billion in Q4FY19 to Rs. 195.13 billion in Q4FY20. VL reported a net loss of Rs. 120.83 billion in Q4FY20 compared to a Rs. 26.65 billion profit in the previous quarter (Q3FY20) and a Rs. 32.18 billion profit in the same quarter of the previous year (Q4FY19). .
Vl’s Issued And Paid-Up Capital Structure
As of October 1, 2020, the authorized capital of VL was Rs. 74.12 billion. The authorized capital was divided into 44.02 billion equity shares with a par value of Rs. 1 and 3.01 billion preference shares of Rs. 10 each.
Delisting: A Failed Attempt
In May 2020, VRL started the process of delisting in the Indian subsidiary VL. VRL held 52.34% of the total issued and paid-up equity share capital of VL while the remaining 47.66% stake was held by public shareholders, including the employee benefit trust (Refer to Exhibit IV for Shareholding Pattern of VL)..
Issues Relating to Delisting Offer
In a delisting related letter to VL’s board, VRL said, “After considering the prevailing market conditions and with a view to provide the Public Shareholders with a fair exit price, we hereby inform our willingness to accept Equity Shares tendered by the Public Shareholders in the Delisting Offer at a price of INR 87.50 per Equity Share..
What next?
Hemang Jani, Head – Equity Strategy, Broking & Distribution, Motilal Oswal Financial Services Limited , said, “Historically, for companies with failed attempts at delisting, share price tends to reach the levels before the buyback, which in case of Vedanta was around Rs 85-90..
Exhibits
Exhibit I: Structure of VRL
Exhibit II: Details of Exceptional Items
Exhibit III: Issued and Paid-Up Capital Structure of Vedanta Limited
Exhibit IV:
Shareholding Pattern of Vedanta Limited as on October 1, 2020
Exhibit V: Schedule of Activities Related to the Process of Delisting
Exhibit VI:
Book Value of VL
Exhibit VII: Flow Chart of Delisting Process
Exhibit VIII: Adjusted Closing Price of Vedanta Limited
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