Vedanta Resources and promoter group companies have moved a proposal to delist Vedanta Ltd from the Indian stock exchanges in a bid to simplify the group structure.
In a stock exchange filing, Vedanta has made a delisting offer for Vedanta Ltd (VEDL), where it holds 50.1 per cent effective stake, by acquiring the equity shares held by public shareholders in accordance with the SEBI Delisting Regulations. Vedanta Limited is a globally diversified natural resources company with interests in zinc-lead-silver, iron ore, steel, copper, aluminium, power, oil and gas.
Commenting on the offer, Anil Agarwal, Chairman of the Vedanta Group, said, "Vedanta Group continues its efforts to simplify the Group structure. This proposed transaction is fully aligned with the robust strategy which has been pursued over the years. Due to the impact of the Covid-19 pandemic, we have accelerated the strategy in this challenging environment to ensure support for meaningful deleveraging and to enable us to continue to invest in the growth of the business.
"The proposed transaction will transform the group's credit profile while offering a fair exit price to the minority shareholders. Provided it can be completed at a price that balances the needs of all the stakeholders, this transaction has the potential to fundamentally reposition our business for the future."
Vedanta officials said that simplification of the corporate structure of Vedanta and its subsidiaries (the Vedanta Group) has been a key ongoing objective for the Vedanta Group, examples of which over the past several years include the merger of various Indian subsidiaries to create Vedanta Ltd, the merger of Cairn India Limited into Vedanta Ltd, and most recently, the take-private of Vedanta Resources plc.
"Vedanta believes that now is the right time to take another important step in simplifying the structure of the Vedanta Group," the sources said.
They added that it has become necessary to accelerate this strategy of simplification of group structure due to the impact of the Covid-19 pandemic, which has created exceptional challenges for businesses in general.
This simplification would allow the Group to get its leverage closer to the operating cash flows amid the current volatile environment for the global commodity and financial markets.
The proposed transaction eliminates the potential impact of future balancesheet risks for current minority equity holders and provides an opportunity to realise immediate and certain value for their shares at a time of elevated market volatility.
They added that Vedanta would be best positioned to weather the risks presented by the current environment as a private company. Perception caused by volatility in the share price (which is driven by relatively low traded volumes) is impacting the company's access to capital markets and there has been downward pressure on the stock in recent times.
"We see an opportunity to reach an outcome that benefits all stakeholders, including equity and debt investors and the Group itself. That outcome must, however, recognise the financial constraints under which the Group is operating," officials said, underscoring the financial position.
They added that the indicative offer price represents a premium of 9.9 per cent compared to Vedanta Limited's closing price as of Monday and "offers equity holders an opportunity to exit at a fair value as we continue our efforts to simplify the group".
The offer price is at Rs 87.5 per equity share which represents a premium of 9.9 per cent over the closing market price of Rs 79.6 as on Monday on the BSE Limited and National Stock Exchange of India Limited.
"We expect our minority shareholders to approve the delisting proposal post which we will make the public announcement for the delisting. The financing arrangements will be in place at the time of making the offer," the officials added.
Pursuant to the aforesaid letter, VRL has requested the board of directors of the company to convene a board meeting to consider and approve the delisting proposal in accordance with the delisting regulations, seek the approval of the shareholders of the company by way of a special resolution through postal ballot in accordance with the delisting regulations and other applicable law, and the approval of the stock exchanges and/or other regulatory authorities.
In accordance with the delisting regulations, the company shall appoint a merchant banker registered with the Securities and Exchange Board of India (SEBI) to carry out due diligence in accordance with Regulations 8(1A) and 8(1D) of the Delisting Regulations.
A meeting of the board of directors of the company is scheduled for May 18 to take on record these matters.