InvestorQ : Why has Anil Agarwal of Vedanta Group UK made an offer to buy block shares of Vedanta Ltd?
diksha shah made post

Why has Anil Agarwal of Vedanta Group UK made an offer to buy block shares of Vedanta Ltd?

swati Bakhda answered.
1 month ago

In a rather interesting deal Anil Agarwal, of the Vedanta Group of the United Kingdom, will buy a total of 4.9% stake in Vedanta Ltd on 24-Dec via a series of block deals. The entire offer is being lead managed by JP Morgan. The offer price has been fixed in the range of Rs.150 to Rs.160 per share, which is around the price that the stock is quoting at.

The Vedanta group currently holds more than half the equity of the company. Post the transaction on 24 December, the stake of the promoters in Vedanta Ltd will increase from 50.14% to 55.04%. We need to understand why this stake spike in Vedanta has been kept at below 5% in this case. This has to do with the SEBI Takeover Code.

You would perhaps recollect that the SEBI Takeover Cord permits promoters holding between 25% and 75% of the equity of an Indian company to buy up to 5% of the outstanding equity via creeping acquisition method in any one fiscal year. However, any acquisition beyond 5% will impel the acquirer to make an open offer to other holders.

One of the expectations of the Vedanta Group is that this stake increase will make it easier for the promoters to eventually delist the company. A couple of months back, Anil Agarwal had to shelve his plan to delist Vedanta Ltd after he could not muster the required 90% of shares of the total shares of the company. LIC is the largest shareholder with 5.58%.

Apart from LIC, there are some large mutual funds like HDFC MF and ICICI Pru AMC which also hold a substantial stake in Vedanta and may be looking to exit the stake at a premium to the price last year. It is not clear which are the institutions that will be selling this stake to Vedanta.