Vedanta Open Offer: Here's What Brokerages Have To Say

Vedanta Resources Plc launched an open offer to acquire a 10% stake in its India unit, a couple of months after a failed delisting.

The parent has offered to buy up to 37.17 crore shares from public shareholders of Vedanta Ltd. at Rs 160 apiece, according to an exchange filing. That’s a 12% discount to Friday’s closing price.

Shares of Vedanta dropped as much as 3.7% to Rs 175.35 apiece in early trade on Monday compared with a 0.81% gain in the Nifty 50.

Here’s what brokerages have to say…

Investec Securities

• Maintains ‘buy’ with a target price of Rs 147 apiece

• Vedanta Resources makes good on SEBI's temporary regulations on takeover code

• Assuming successful tendering, the promoter’s stake will increase to 65.11%

• After failed reverse book building, accelerated share purchase and voluntary open offer were logical conclusions

• Move to reduce leakage while upstreaming dividends

• Recommends to tender based on target price

• Multiple potential uncertain events remain such as Bharat Petroleum Corp. acquisition, Videocon Industries Ltd. bid, lease expiries, production sharing contract extensions, among others

Edelweiss Securities

• Downgrades Vedanta to ‘hold’ from ‘buy’, with target price at Rs 170 apiece

• The stock has achieved fair value of Rs 170 and is just a dividend play

• Open offer price remains pretty unattractive

• Upside potential is limited despite positive view on commodity cycle

• Stock volatility might not yield good returns for minority shareholders

Motilal Oswal

• Maintains ‘neutral’ with a target price of Rs 187 apiece

• Sees Vedanta’s open offer to buy about 10% stake as a step towards another attempt at delisting

• An open offer at around 12% discount to current market price could adversely impact the stock price

• If the open offer goes through, promoter shareholding would rise to nearly 65%

• Capital allocation would be a key factor to watch