NEW DELHI: Shares of Vedanta Limited slipped into red — plunging 2.7 per cent to Rs 89.95 apiece — Tuesday after the board of directors approved its promoter’s proposal to acquire the balance 49.9 per cent shareholding in the subsidiary and to de-list it from the stock exchange. If the de-listing plan goes through or not will, however, be decided by the shareholders.
"Approval was granted to seek shareholders’ approval for the de-listing proposal via a special resolution through postal ballot and e-voting," Vedanta said in a statement.Parent Vedanta Resources has explained its de-listing offer as an extension of its efforts to "simplify" the group structure. The acquisition of the minority stake will be at a price that is the higher of either the floor price — Rs 87.5 per share, which is a 10 per cent premium over the closing market price of Rs 79.6 on May 11, or the price discovered through reverse book building process set out in the de-listing regulations.
Adding to the prevailing debt pile-up, the debt-financed transaction would further stretch its balance sheet at a time when the company is already struggling to generate cash flows as low oil and metal prices have cast a shadow over the group’s fortunes, say analysts. At the initial offer price of Rs 87.5 per share, Vedanta’s cash outflow for the 49.9 per cent shareholding in Vedanta Limited will add $2.2 billion in additional borrowing, estimates Moody’s.
Vedanta Resources’ current debt is about $7 billion, with nearly $1.9 billion maturing in the next 12-15 months.But, the de-listing is long-term positive, argue analysts. "The transaction is credit positive and it will provide Vedanta better access to future cash surpluses and cash of around $1.4 billion held at Vedanta Ltd and subsidiary Cairn India Holdings," Moody’s noted.
Debt pile
At the initial offer price of Rs 87.5 per share, Vedanta’s cash outflow for the 49.9 per cent shareholding in Vedanta Limited will add $2.2 billion in additional borrowing