InvestorQ : Why has Vedanta withdrawn its delisting offer and what happens now?
Arusha Ray made post

Why has Vedanta withdrawn its delisting offer and what happens now?

Answer
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Sam Eswaran answered.
2 weeks ago


It was perhaps the most talked about and also the largest delisting proposal in the Indian market. However, late last week, the delisting manager, J P Morgan, issued a terse notice saying that Vedanta was constrained to withdraw its buyback and delisting offer.

The question is why did this problem come about when the promoters and investment bankers were claiming all along that they had received more than 90% of the public float. The issue was due to a technical glitch, for which SEBI refused any extension.

That, of course, was the palpable reason. The reason was that LIC had moved in to make such a move tough by bidding for its 6.37% stake at a price of Rs.320. That was more than twice of what the promoters of Vedanta were willing to pay for the stock.

As a result, the promoters failed to muster the required 90% outstanding capital as stipulated for delisting. The promoter group had to mop up a total of 1.34 billion shares but could mange confirmed bids of just 1.26 billion shares at the end of 5 days of reverse book building process.

Clearly, the gap between what Vedanta was willing to offer and what LIC was expecting was just too high and could not be bridged. Hence the shares tendered for delisting will be returned to shareholders and the company will continue to remain listed for the time being.

The promoters had collected a war chest of around $3.5 billion through loans and that would have implied a best case price of Rs.140-150 for the stock of Vedanta as against the original floor price of Rs.87.50.

In the past, most delisting buybacks have happened at a premium of 80-120% but the premium was almost 300% in this case. Like in the case of Linde AG, which opted to withdraw the buyback offer, Vedanta too is putting off delisting plans for now.