Vedanta's failed delisting bid comes under Sebi's scanner; stock falls 20%

Regulator to probe various aspects of failed deal, including placement of 120 mn unconfirmed bids

Various aspects of Vedanta’s failed delisting bid have come under the Securities and Exchange Board of India’s (Sebi’s) scanner.

The volatility in the stock price on Friday after the management hinted at a counter offer, placement of 120 million unconfirmed bids, and tendering price of mutual funds (MFs) are some areas that the markets regulator might take a look at, said people in the know.

Shares of Vedanta plunged 21 per cent on Monday after the company announced that the delisting attempt by London-based promoter Vedanta Resources had been “deemed failed”.

Reverse book building (RBB) for Vedanta closed on Friday. Stock exchange data during market hours showed that the RBB had garnered 1.37 billion bids, around 30 million more than what was required for the delisting to succeed — propelling the stock price in intra-day trade. At that time, Chairman Anil Agarwal gave an interview to TV channels where he talked about the possibility of a “counter offer”.

At higher levels, the stock witnessed selling pressure. Later, it emerged that 120 million unconfirmed bids had been rejected. The total bids received were 1.25 billion, 90 million short of the 1.34 billion required for the promoters to reach the 90-per cent shareholding mark.

“Sebi must mandate that all the bids that are placed must be confirmed by shareholders before the last date of the bidding period and define what is meant by such bids. Otherwise, there will be lot of confusion created over the fate of the price discovery as happened in case of Vedanta,” said J N Gupta, founder, SES, a voting and governance advisory firm.

He said Sebi must see if the bids “were in effect real and backed by shares or these were hoax bids to give a false sense that 90 per cent level is achieved”. Gupta added: “In fact, Sebi must call for the data and find out who placed these bids and why they remain unconfirmed.”

Sources said another aspect the regulator will inspect is the price at which MFs tendered their shares. “Sebi may ask for the basis on which MFs offered their shares between Rs 150 and Rs 160 per share. It may ask MFs to furnish the recording of their investment decision,” said a source.

Life Insurance Corporation (LIC) of India, the largest public shareholder in Vedanta, is said to have offered to tender its shares at Rs 320. 

“There has to be some reason why some investors thought Rs 320 was the fair price, while some were willing to tender their shares at less than half that price. 

The regulator has to probe if fund managers were acting in the best interests of their unitholders,” said an investment expert.