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The Vedanta Resources announcement on Monday that it would delist from the London Stock Exchange (LSE) comes at a time when its Chairman Anil Agarwal is taking a back seat in the daily functioning of the group himself. Agarwal would, however, retain control through his personal trust Volcan Investment.
Announcing an all-cash offer by Volcan to its shareholders, the London-listed Vedanta Resources said the transaction could take place through a wholly-owned subsidiary of the trust which is offering 825 pence a share in addition to the previously announced dividend of $0.41. “When taken together, the offer price represents a total value of 856 pence a share,” Vedanta Resources said in a stock exchange filing.
It is expected that an offer will be made in 28 days. Its offer will be open for a certain period of time governed by UK rules (three to six weeks), following which the process will be completed. “Volcan has the financing for the offer lined up and will announce details before the formal offer,” Agarwal said in an emailed interview to Business Standard.
Independent directors on the board of Vedanta Resources have been given “attractive terms for an exit,” he said.
The company filing said the move was for the on-going simplification of the corporate structure which included the merger of Vedanta Limited and Cairn. “Vedanta Resources does not in any way directly run much of the group’s businesses,” a company official added. Delisting would, however, allow the holding company to be free from mandatory disclosures at a time when the group is under intense public scrutiny for its various businesses.
“The prime reason to delist could be to avert the heat the company keeps facing from time to time with regard to environment issues pertaining to businesses in India and overseas. Also, once it becomes a private entity it can have a free hand in decision-making,” said Giriraj Daga, portfolio manager, Visaria Securities.
Anil Agarwal’s younger brother Navin, however, is likely to continue playing an active role in the group’s running. Navin is the executive vice-chairman in Vedanta Resources and executive chairman in India-listed Vedanta Limited.
Anil Agarwal said increasing maturity of the Indian markets was one of the reasons to delist from the LSE. “The liquidity of Indian markets now means that the need for a separate London listing is no longer critical,” he said.
Though the Vedanta group is present globally in the natural resource business, the parent company’s presence in India is through a 50 per cent holding in Vedanta Limited, which also controls its Australian copper business.
Volcan currently hold 66.53 per cent in the Vedanta’s total issued share capital. The offer is conditional to the UK regulatory clearances and 90 per cent acceptance condition.
Currently, Anil Agarwal has 21 per cent stake in Anglo American Plc. With delisting of Vedanta Plc, the billionaire could have a free hand in putting investment or servicing debt taken to buy Anglo American stake as it could use the dividend received from Vedanta Limited for this purpose, said Daga.
Another analyst, who did not want to be named, said since London regulations are more stringent than India and since the company hardly has any assets outside (only Konkola copper mines and zinc in Zambia) of India, it makes sense to delist overseas. “Vedanta will then not have to comply with two regulators. Also, listing comes with a cost such as separate auditors, etc,” he said.
