InvestorQ : Do you think that as a shareholder, I should just accept the delisting offer given by Vedanta and exit the stock?
Mahima Roy made post

Do you think that as a shareholder, I should just accept the delisting offer given by Vedanta and exit the stock?

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6 months ago
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In one word, the answer is yes. Let me tell you why. Vedanta India has its problems as does the parent company and this is a good opportunity for the stock to monetize at thrice the original delisting price proposed. To begin with, Vedanta Ltd has a plethora of problems in India despite have a very wide portfolio of commodity assets. For example, its massive Tuticorin copper plant faces environmental challenges and is yet to start full operations.

Remember that Vedanta has already paid a steep price for Cairn assets and has been struggling at a time when the oil prices have been volatile at best and tepid at worst. What Vedanta PLC is really interested in now is to get 100% control of Vedanta India and gain full control over cash flows. Such funds can be used to defray debt by the Vedanta group.

Some investors have been confounded whether they should accept the offer. That is because, LIC had demanded a price of Rs.320 per share. Even though the price offered is lower LIC is unlikely to be too rigid about its Rs.320 price offer. This is not a commodity super-cycle like 2003 and the recovery may not last much beyond 2022. Post that it will be back to lower growth rates.

Even as a runaway rally in aluminium is ruled out, there are other concerns too. The over group at the holding company level has been repeatedly embroiled in corporate governance issues. On top of it, Vedanta Resources will be stuck with a $8 billion debt overhang. It surely does not look like a good idea to bargain too much and look for exits.

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