Will Vedanta’s sweetened open offer find takers?


After a failed delisting attempt last year, Vedanta Resources Ltd (VRL), the parent of Vedanta Ltd, has upped its open offer price again. The London-based firm will now seek to buy 17.51% stakes in Vedanta Ltd at Rs235 ($3.24) a share. This though is significantly higher than the offer price of Rs160 apiece previously, nevertheless only marginally higher than Tuesday’s closing price of the stock at Rs226.55.

The promoter group company had seen previous delisting attempt of Vedanta Ltd fail as minority shareholders and some institutional investors did not want to tender shares at the low open offer prices. The fundamentals of the company had been improving and many investors were of the view that the company’s share had traded much higher (near Rs300 levels) earlier, when the commodity cycle was favourable.

The company thereby has upped its open offer price again. However, it will be interesting to see if the investors are willing to tender shares even now. The commodity cycle has become more favourable; Aluminium, Zinc prices that matter more to Vedanta have continued to rise further; China trade data is favourable; limited supplies of metal indicate that the base metal prices may continue to remain firm. Analysts are of the view that Chinese authorities remain determined to slash output as part of that country’s efforts to formulate a carbon emission programme. This should support base metal prices further and in turn Indian metal companies.

What is more, even crude prices have been on a rise, and that is improving Vedanta’s earnings and cash flow expectations further. Analysts at IIFL Securities Ltd recently said that with prices of Zinc, Aluminium and crude sharply rallying post 2QFY21, they are upgrading Vedanta’s FY22 and FY23 Ebitda estimates by 19% and 14% respectively. Ebitda is earnings before interest, tax, depreciation and amortization. The longer these prices sustain (driven by emission-led supply curtailments for Aluminium in China and overall recovery in the global economy), the healthier will be cash generation and deleveraging at Vedanta Ltd they had added. With the analysts thereby expecting more gains for the stock-based ion fundamentals itself, whether the institutional investors and retail investors will now tender shares during the open offer still remains to be seen.

News Source:- Livemint

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