Suresh P Iyengar Anil Agarwal-owned Vedanta has not only surprised investors by offering to delist amid the peak of the Covid-19 crisis but also offering the lowest indicative price of ₹87.5 for the reverse book building process.

In fact, the value per share of Vedanta’s stake in Hindustan Zinc itself is ₹137 apiece.

Vendata holds 64.92 per cent in Hindustan Zinc while the government’s stake stands at 29.53 per cent.

The book value of Vedanta as on last September-end was ₹178.

In the delisting process, minority shareholders usually expect the offer price to be closer to the replacement value, or significantly higher than the ruling price.

Institutional investors including mutual funds, which hold 10.9 per cent and LIC with 7 per cent, have a crucial role in protecting investor interest with the board of Vedanta already clearing the delisting offer.

In a note, HDFC Securities said the stock is currently trading close to its 52-week low, and at a steep discount to its five-year average due to the Covid-19 crisis. Vedanta’s current market price does not seem to reflect the fundamental value of the company’s equity.

When Vedanta Resources went private from the London Stock Exchange, investors were offered a premium of 27 per cent.

Tendering of shares unlikely

Vikas Jain, Senior Research Analyst, Reliance Securities, said the delisting offer is not attractive and both institutional and retail shareholders will not tender their shares at the current price.

The delisting offer price may have to be raised going forward as minority shareholding is almost at 50 per cent. Even if the offer is not revised, shareholders will have a chance in the second round to tender their shares, he added.

HDFC Securities said investors have the option not to participate in the delisting offer and they can offer their shares in six months if the delisting happens at a higher price.

Alternatively, HDFC Securities said investors can offer their shares at ₹160-180 and wait for the outcome.

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