On 12th May 2020, Vedanta India came up with a delisting offer priced at ₹87.5 per equity share. Ahead of the announcement, the company’s shares soared 9.45% on the NSE, crossing the proposed delisting price of ₹87.5.
What is Delisting of Shares?
Delisting is the permanent removal of the company’s shares trading in a public stock exchange and the company becomes a private company. It is also known as the “reverse book building process” since it’s a reverse procedure of listing.
Share holding of Vedanta
The promoter group, including Vedanta Resources, owns 50.13% of Vedanta Ltd, while the remaining 49.48% is held by public shareholders(General Public, Mutual Funds, Banks, Institutions, and GDRs).
|Holder’s Name||No of Shares||% Share Holding|
|No of Shares||3717196639||100%|
|Banks & Mutual Funds||405526471||10.91%|
Indicative offer price
Indicative offer price set by vedanta is Rs 87.5/- per share. Indicative offer price is to influence the public shareholders to make them accept the offer. However, no public shareholders has no obligation to accept the price.
Sebi regulations provide scope for only three kinds of price
Floor price – which acquirers at the minimum price are committed to accept under the reverse book-building process. The promoter needs to open an escrow account and deposit the amount of consideration based on floor price & a number of equity shares outstanding with public shareholders.
Discovered price – the price at which the maximum number of bids are received
Exit price and Final price – which the acquirer is willing to pay to shareholders for delisting a company. Exit Price and Final Price is not necessarily the indicative price from the promoters.
The company does not set the eventual delisting price. It is the investor who sets it. While investors can quote the price they want, the acquirer has the freedom to accept or reject it.
It is a high risk game to trade the delisting shares. If the promoter is not willing to accept the higher prices he/she might withdrew the offer and in such cases stock might end up collapsing.
What is the Motive of Delisting Vedanta?
Vedanta’s delisting, according to the group, aids its corporate simplification process and provides it with “enhanced operational and financial flexibility in a capital intensive business”.
Vedanta India parent Vedanta PLC was listed in London in 2000s . Went private in 2018 after many controversies.
Going forward it’s going to be extremely tough for promoters to delist as Domestic Institutions might disagree with the current indicative pricing offered by the promoters.