Vedanta shares tank 22%; public shareholder clueless as delisting fails, but is it now a value buy?

After the failed delisting, shares of Vedanta Limited tanked 22% on Monday to trade at Rs 94 per share. The mining major, led by billionaire Anil Agarwal, had been aiming to go private, but could not as public shareholders did not tender the required 134 crore shares that were needed for the firm to go off the stock exchanges. The floor price for the delisting of shares had been set at Rs 87.25 per share but majority of the stocks tendered till Friday by public shareholders were in the range of Rs 140-150 per share.

For Vedanta Limited to go private, the promoter group needed to acquire a 90% stake in the company, up from its 50.14% holding currently. For this promoters needed the public shareholders to tender at least 134 crore shares. “As promoter group required to increase their holdings to at least 90% for successful delisting, but after the bidding of total 137.78 cores share only 125.47 crores shares are only confirmed by the shareholder, which is less than the required number of shares for successful delisting,” said Yash Gupta – Equity Research Associate, Angel Broking. He added that the failed delisting will have a negative impact on the stock. 

As the status quo stands, promoters of the company will not be able to table a counter offer for shareholders. “The failure of the delisting offer is sentimentally negative for Vedanta,” said ICICI Securities. Market participants have been stunned by the over 12 crore unconfirmed bids that were left hanging even after the window was extended for the reverse book building process on Friday. Stocks were tendered at various prices from Rs 87.25 per share to over Rs 1,000 per share. Most bids at a single price were placed at Rs 320 apiece, which analysts say, were from LIC.

“The withdrawal from the delisting process for any company acts as a catch 22 for the promoters/Key people involved in the deal as it may trigger the insider trading probe in midst of fluctuating stock prices during the period coupled with the extremely cumbersome norms making it difficult, if not impossible to delist a company,” said Makarand Joshi, partner, MMJC and Associates LLP – a corporate compliance firm.

Analysts say that further communication from the market regulator or the promoters of the company will be key in deciding the movement of the stock. However, the stock could turn to be  a value buy if it stoops any lower. “Vedanta Limited could be a value buy if it goes down around Rs 80 and investors can accumulate at those prices,” said Vishal Wagh, Head of Research, Bonanza Portfolio. He added that existing shareholders need to wait for clarity from promoters and the market regulator on the failure of the delisting process and the way forward.