Vedanta shareholders may drive a hard bargain in the company's delisting offer that begins today. Proxy advisor SES has asked them to seek ₹236-310 per share from the promoters.

“A crown jewel of Vedanta is the cash-rich Hindustan Zinc Ltd (HZL), which needs more attention. Its market capitalisation is over ₹85,000 crore and its embedded value in Vedanta is ₹55,000 crores, translating into ₹148 per equity share or 70 per cent higher to the (current delisting) floor price and 65 percent higher to the book value,” SES (Stakeholder Empowerment Services) has reasoned in its report.

It also says that Vedanta has an unpaid HZL dividend of ₹12.18 per share, which promoters have not passed on to shareholders. In May, HZL paid around ₹7,000 crore as dividend, of which, ₹4,500 crore was received by Vedanta.

HZL dividend

“According to the company policy, the entire dividend amount received by Vedanta from HZL (other than special dividend) is to be passed on to its own shareholders. Assuming that Vedanta gets delisted this year, the entire dividend of ₹4,500 crore will be taken by the promoters, when nearly ₹2,250 crore had to be passed on to the public shareholders of Vedanta,” SES said.

This apart, SES says shareholders should consider Vedanta’s business valuation and its future prospects, for which the company’s promoters are eager to delist.

SES calculated Vedanta’s valuation by various methods in range of ‘market price’, ‘sum of parts of Vedanta Businesses’ and ‘Book Value’. “The value had ranged at ₹ 236- 310 per share,” SES said. On the stock exchanges, Vedanta's three year high share price is ₹355.

Vedanta did not respond to an email query sent by BusinessLine seeking comments on the SES report. UK based promoters of Vedanta hold 50 percent stake in the company. To delist, they have to take their holding past 90 percent. The promoters delisting floor price is ₹87.25 per share.

But the delisting offer will go through a reverse book building, where shareholders will quote their price and promoters can make a counter offer. According to SES, law says that promoter counter offers cannot be less than the book value of the company and it is this reason that Vedanta may have recalculated its book value. “It is an age old technique that if you want to buy something, first undervalue and then create a negative environment so that the seller is convinced that the thing is not valuable.. Already news items have started appearing about the likely price of delisting, as if the newspapers know the mind of investors. Fact is that the interested parties are probably revealing their mind through newspapers,” SES claimed in its report.

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