For the last few days, I was not writing anything. Instead, I was searching for a good story. Vedanta delisting was good, but as all significant publications were doing it, I can’t see any reason to do it.
Then came Adani Power. Today in the news Adani Properties came up with a proposal to delist Adani power with other promoter groups.
I don’t have a holding in both companies. I am bullish on Vedanta. But corporate governance of Vedanta is something that I don’t like much.
So why All of these companies are coming up with delisting plans.
Let’s start with what is delisting.
Delisting is the removal of a listed security from a stock exchange. The delisting of a security can be voluntary or involuntary and usually results when a company ceases operations, declares bankruptcy, merges, does not meet listing requirements, or seeks to become private.
In the case of Vedanta and Adani Power, the last reason mentioned is a significant reason.
There are some advantages and disadvantages. But when You have one cash cow in your group, you don’t need to think about it.
Vedanta Delisting
many articles mentioned that the delisting of Vedanta is already looking opportunistic. In one of my earlier posts, I even said that the price of Vedanta is very much below intrinsic value. It is below the book value. Discounted cash flow received from Hindustan sink, Cairn India, and some other companies are very much discounted profoundly. When we value the natural resources companies, We need to make some assumptions that with industrialization, some resources and their demand will increase. With that, the price of it will also increase.
The issue of Vedanta is not all about debt but also corporate governance. When a company gets delisted there is not mandatory to comply with so many rules and other things. So it can think about the long term and not having any restrictions placed by regulators. Be it buying an interest in South African miner Anglo American Plc from the Indian group’s controlling shareholder and billionaire Anil Agarwal’s family trust or the issue with its mins and the public coming on streets in England. Agarwal’s Volcan Investments Ltd. has taken his London-listed Vedanta Resources Ltd. private as the entrepreneur sought to simplify the corporate structure of his resources group. Now, in India also, he is giving the same reason. I talked about it in detail in my recent post. You can read it here.
Adani Power Delisting
As the notice sent to the exchanges, Adani properties and the Meeting of the board of directors of Adani Power is to be held on June 3, 2020. In the delisting proposal letter, APPL has expressed its intention either by itself or together with other members of the Promoter Group, as the case may be, to acquire all the equity shares of the company, each equity share having a face value of Rs 10, held by the public shareholders of the company.
Mundra UMPP is one big issue for the company. Pledge holding for the company is continuously increasing. I know that contract selling power for utility companies is essential. But DIIs are selling this stake. Increasing pledge. Sure debt ratio is high. Book value is significant, but EPs show different pictures. Mutual funds are continuously selling. Here the image is a little bit other than Vedanta.
Vedanta has some assets. The promoter of Vedanta knew how to run companies. Building an extensive empire is too simple. But I am also sure that not many investors are interested in losing such a goose who is giving golden eggs.
I am not holding any share in any of the companies mentioned above.
If you are holding two or only Vedanta, Oppose Vedanta delisting. This company has some good value in their subsidiaries. The Hindustan sink is their cash cow, and they want that cash to be debt-free. I am sure that nearly all credit rating agencies are pessimistic about Adani power. There is no significant value visible in that stock. The only thing is that his business is paying. Leave from Adani power and keep Vedanta with you. If possible, keep the delisted shares.
