Promoters on delisting spree as discounted shares beckon

Mumbai: This seems to be the closed season for keeping companies open to public scrutiny. The list of businesses seeking to de-list — Vedanta, Adani Power and Hexaware Technologies — could further swell until valuations recover from multi-year lows for several industries.

“The current markets present a good opportunity for some promoters to delist their companies,” said Ravi Sardana, EVP, ICICI Securities. “Share prices are at a substantial discount to their historical highs and one can expect a higher level of participation from shareholders in the present environment of uncertainty.”

On Friday, Hexware Technologies told the stock exchanges that it had received a proposal from the promoter of the company, HT Global IT Solutions Holdings, expressing its intention to voluntarily delist.

Anil Agarwal’s Vedanta Resources was the first company to announce the delisting of its Indian listed firm Vedanta Ltd after the sharp fall in stock prices as a result of Covid-19 outbreak. Vedanta’s stock price declined from its 52-week high of Rs 180 to Rs 105 on Friday.

Promoters usually raise stake when valuations are stressed, according to bankers.

“Stake consolidation either through tender offers or delisting as a product typically takes off after severe market corrections. We saw this trend playing out in the early 2000s, after the global financial crisis and now,” said Nipun Goel, head of investment banking, IIFL. “If the company is delisted, it gives a lot more flexibility to restructure the businesses.”

promoter graph

Last week, the Adani group announced that they were planning to buy back the entire 25% public shareholding of Adani Power through a reverse book-building process. On Wednesday, the company appointed a merchant banker to evaluate the proposal to delist.

According to reports, the world’s largest spirits maker Diageo Plc is exploring options to delist its Indian arm, United Spirits.

Bankers said that until recently, delisting was not that easy as investors were demanding a huge premium to the current market price, which promoters were not willing to offer. However, the situation has suddenly changed following the Covid-19 outbreak and now investors would be ready to offer their shares at a reasonable premium due to uncertainty.

Last year, UK’s biggest industrial, medical and special gases provider, BOC tried to delist its Indian arm but failed after investors sought about Rs 2,025 per share, which was more than four-and-a-half times the floor price of Rs 428.50 set by the promoter. After the failure of the delisting offer was announced on January 25, shares of Linde India halved within a month.

The final delisting price or discovered price will be determined in accordance with the reverse book-building process. The promoter has the sole discretion to accept or reject the discovered price.


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