LSE – Promoters of Vedanta make an open offer for up to 37.2 cr shares at ₹160/share

The current open offer represents 10% equity stake in the company.

On Friday, the company’s stock on NSE closed 3.5% lower at ₹178.85.

The company’s attempt for delisting failed in October 2020.

The open offer, which will be managed by JPMorgan Chase & Co.’s India unit, will be a voluntary open offer, with no minimum level of acceptance by Vedanta, according to the filing. If Vedanta Ltd. holders were to accept share tenders for the entire 10%, the consideration for the deal would be ₹5,948 crore.

“Voluntary open offer for acquisition of up to 371,750,500 (Three Hundred and Seventy One Million Seven Hundred Fifty Thousand Five Hundred) Equity Shares (as defined below), representing 10% of the fully diluted voting share capital of Vedanta Limited (“Target Company”) from the Public Shareholders (as defined below) by Vedanta Resources Limited (“Acquirer”) together with Twin Star Holdings Limited (“PAC 1″), Vedanta Holdings Mauritius Limited (“PAC 2″) and Vedanta Holdings Mauritius II Limited (“PAC 3″ together with PAC 1 and PAC 2 to be referred as “PACs”), in their capacity as the persons acting in concert with the Acquirer,” the company said in a stock exchange filing.

Vedanta Resources Limited, headquartered in London, is a diversified resources company with interests mainly in India. Its main operations are held by Vedanta Ltd, a 50.1 per cent-owned subsidiary. Through Vedanta Resources’ various operating subsidiaries, the group produces oil and gas, zinc, lead, silver, aluminium, iron ore and power.

Delisted from the London Stock Exchange in October 2018, Vedanta Resources is now wholly owned by Volcan Investments Ltd. Founder chairman of Vedanta Resources, Anil Agarwal, and his family, are the key shareholders of Volcan.

Last month, Moody’s Investors Service has downgraded the corporate family rating of Vedanta Resources Limited to B2 from B1 citing persistent weak liquidity and high refinancing needs.

Moody’s has also downgraded the ratings on the senior unsecured bonds issued by Vedanta Resources (VRL) and those issued by Vedanta Resources Finance II Plc (VRF) and guaranteed by VRL to Caa1 from B3.

All ratings remain under review for further downgrade, Moody’s said in a statement.

“The downgrade primarily reflects the holding company VRL’s persistently weak liquidity and high refinancing needs amid growing signs of an aggressive risk appetite, with implications for the company’s financial strategy and risk management, a key component of our governance risk assessment framework,” said Kaustubh Chaubal, a Moody’s Vice President and Senior Credit Officer.

The rating action, Moody’s said, also considers the impact of the company’s governance practices on its credit profile, a credit negative.

Moody’s said the holding company VRL’s liquidity is severely challenged with $2.8 billion of its debt maturing from January 2021 through June 2022, including intercompany debt maturities of $507 million and a $325 million debt maturity at VRL’s sole shareholder Volcan Investments, which Moody’s expects to be serviced out of VRL group cash flows.

Further weakening its liquidity is an estimated $470 million of annual interest expense.

Also, its Indian listed flagship Vedanta Ltd (VDL) has made a commitment to investors that no further inter-company loans will be extended without approval from the board.

This, Moody’s said, restricts cash movement options from operating subsidiaries to the holding company (VRL) to dividends and a nominal management/branding fee from its operating subsidiaries.

“However, Moody’s cautions that the group’s complex structure with less than 100 per cent shareholding in key operating and cash-rich subsidiaries, restricts the amounts of such dividends,” the statement said.