Shares of Vedanta traded flat in Monday's trade as the reverse book-building process kicked off for the delisting of the stock.

The indicative floor price for the bidding process has been set at Rs 87.25 per share. Analysts said the revised consolidated book value of the company at Rs 89.38 projects a very conservative view of the business and the floor price does not reflect the true value of the stock


They advised investors to bid at a much higher price than the offer price or prevailing market price. Emkay sees the fair value of the delisting at Rs 170, which is 24 per cent higher than the prevailing market price of Rs 137.

Stakeholders Empowerment Services (SES) says Vedanta’s stake in Hindustan Zinc NSE 2.18 % alone is valued at Rs 145. Vedanta held 64.92 per cent in the company as of June 30.

“Hence, investors should not mind bidding at Rs 200-250 per share,” SES said. A Rs 250 bid would be 82 per cent higher than the current market price.

The Process
Reverse book building is a mechanism to determine the share price for delisting of a stock. Shareholders, who wish to participate in the delisting process, can tender their shares by quoting a price at or above the floor price.

The bidding process would close on October 9, Friday.

After the bids are collected, they are arranged in lowest to highest order. As soon as the total bids touch 90 per cent of share capital in that order, that bid price becomes the price that the acquirer needs to pay if he wants to delist the company.

Shareholders will then have up to one year to tender their shares, if they wish to, at the arrived reverse book building price. For those not happy with the higher bidding price, an acquirer can make a counter offer that needs to be at least above the book value.

"Investors must ignore the floor price, book value and 52-week low price, as they do not reflect the true value of Vedanta shares,” Stakeholders Empowerment Services (SES) said in a note.

Book value write-offs
Emkay Global noted that the Vedanta management earlier reduced the book value from Rs 189.63 per share to Rs146.87, citing long-term concerns over oil prices after Covid-19, which was ‘very conservative’.

The book value, it said, was further reduced to Rs 89.38 per share as per the calculations u/s 2(57) of the Companies Act.

SES said even as the company's annual report presented a rosy picture in investors presentations and conference call transcripts, it wrote off almost Rs 17,400 crore. This, it noted, was more than 40 per cent of its market capitalisation of Rs 39,000 crore.

"The write-off was announced on June 6. But the market was unperturbed, to say the least. SES is of the view that a huge write-off generally results in share prices plunging almost immediately. However, the market has realised that the write-off was not a cash loss, but a mere book loss, and it does not impact the going concern assumption of business. It is mere re-evaluation," it noted