Vedanta promoters to raise stake by 5% in Indian arm via block deals

Stake hike comes after Vedanta Resources, the company's promoter, had failed to delist Vedanta Ltd in October as it did not get bids for a sufficient quantity of shares

Promoters of Vedanta Limited plan to launch an offer to qualified institutional buyers (QIBs) to buy up to 4.98 per cent stake in the India-listed base metals to crude oil producer through accelerated bookbuild purchase of equity shares (block deals) on Thursday.

The increase in stake comes after Vedanta Resources, the company's promoter, had failed in its attempt to delist Vedanta Limited in October as it did not get bids for a sufficient quantity of shares. A total of 1,254.7 million shares were tendered by shareholders, against 1,697.3 million shares sought by promoters.

An increase in stake could make it a bit easier for the promoters to delist the company after the mandatory one year cooling off period gets over.

Promoters are expected to offer Rs 150.45 – Rs 160 per share for the block deals, with the intention to buy up to 185 million shares. This translates to a deal size of Rs 2,783 – Rs 2,960 crore, as per the indicative price band. The deal could take the promoter's shareholding in Vedanta Limited to 55.12 per cent from 50.14 per cent at the end of September 2020 quarter. As per Sebi norms, any promoter holding between 25 – 75 per cent can hike stake by up to 5 per cent through creeping acquisition in a particular financial year.

JP Morgan India is banker to the deal.

Block deal orders should be in the range of plus or minus 1 per cent from the last traded price or the previous closing price (if there is no trade executed in the scrip before entering of the block deal order) subject to the applicable price band for the scrip.

Vedanta shares closed at Rs 150.45 apiece on Wednesday on the BSE, up 8 per cent over the previous day's close. The shares have hit a 52-week high of Rs 166.05 and a 52-week low of Rs 60.3.

Vedanta's consolidated revenues dropped 4.3 per cent to Rs 20,804 crore in the September quarter from the year-ago period. Its profit after tax slumped to Rs 824 crore, a drop of 61.8 per cent over the corresponding quarter in the previous year.

According to media reports, billionaire Anil Agarwal plans to invest $10 billion through a new partnership targeting government privatisations in India.

The metals tycoon is teaming up with London-based Centricus Asset Management to seek investments in Indian firms offering substantial growth opportunities.

Promoters raising stake could also be a sign of their conviction of the stock price being undervalued or expectations that the company might clock a faster growth in the future, say market experts.