Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Yesterday after the close, <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> made an announcement of Intention to delist American Depositary Shares from the New York Stock Exchange and terminate its American Depositary Share Program.This has been a big mover. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/745/original/Screenshot+2021-09-25+at+11.33.54+PM.png?1632584056" class="editor-image img-responsive" data-smartkarma-image-id="231745"></figure></section>The elimination of the ADS sets up a group of Very Interesting Possibilities and it is worthwhile working through what those possibilities are, and what the timing could be.

Yesterday after the close, Vedanta Ltd (VEDL IN) made an announcement of Intention to delist American Depositary Shares from the New York Stock Exchange and terminate its American Depositary Share Program.This has been a big mover. The elimination of the ADS sets up a group of Very Interesting Possibilities and it is worthwhile working through what those possibilities are, and what the timing could be.

Vedanta To Eliminate Its ADRs - Creates VERY Interesting Possibilities

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Shanghai Shenzhen CSI 300 Index / Technical Analysis

Global equities (MSCI ACWI, ACWI ex-US, and EAFE) remain bullish with their uptrends intact, and the MSCI Emerging Markets index continues to hold above major support at $52 on the EEM-US. Additionally, Europe’s STOXX 50 and Hong Kong’s Hang Seng are on the cusp of short-term breakouts, while the major indexes in China (Shanghai Composite &amp; CSI 300) are currently breaking above short-term resistance... see chart below. Considering the absence of breakdowns and the fact that market dynamics remain largely positive, our overall constructive outlook remains appropriate.

Global equities (MSCI ACWI, ACWI ex-US, and EAFE) remain bullish with their uptrends intact, and the MSCI Emerging Markets index continues to hold above major support at $52 on the EEM-US. Additionally, Europe’s STOXX 50 and Hong Kong’s Hang Seng are on the cusp of short-term breakouts, while the major indexes in China (Shanghai Composite &amp; CSI 300) are currently breaking above short-term resistance... see chart below. Considering the absence of breakdowns and the fact that market dynamics remain largely positive, our overall constructive outlook remains appropriate.

Chinese Indexes Headed Higher; Actionable Themes: Transportation, Materials, and Services

<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> has, for the last year, been subject to dramatic corporate actions which have roiled the share price, and expectations. The launch last May of a Delisting Proposal by the promoters when the shares were trading sub Rs. 90/share led to a rally in the shares which could not even track peer stock performance, and when the Delisting Proposal failed, shares dropped to a dramatically low level, despite the fact that Vedanta owned its shareholders a substantial dividend from the pay-through of dividends from <a href="https://www.smartkarma.com/entities/hindustan-zinc-ltd" target="_blank" data-smartkarma-citation="entities:8688:1" rel="noopener">Hindustan Zinc (HZ IN)</a>. As commodity prices continued to rally, and VEDL paid a big dividend in October 2020, it looked like the time to double-up. Everyone "knew" the promoters were willing to pay 40-50% than the post-Delisting Proposal failure to take the whole thing private. I expected a buyback. 10 days after the CEO said "we have no plans to buy more shares" we got an off-market block purchase of 5% by the promoters in December at Rs 160, followed a couple of weeks later by a proposed Open Offer to buy another 10%, which was later upsized and up-priced - by 47%, and still the Promoters could only get 10% of the 17.5% they sought to buy. A month on from that and the shares are nearly 10% higher than the Open Offer Price while a Peer Basket is largely unchanged from two months back. This means VEDL shares are again (as they were just before  at their high point against Peers since pre-pandemic. The current situation of covid-19 and variant spread in India is terrible and one could imagine that some drastic measures may still be taken to contain the spread, which could slow down the economy dramatically. The 70% catchup vs peers to reach the December 2019 level (as of post-Delisting Proposal failure) has now been caught up. The VEDL 2-3yr forward EV/EBIT ratio is now less than 1 turn from its long-term average spread to peers. More below the fold.

Vedanta Ltd (VEDL IN) has, for the last year, been subject to dramatic corporate actions which have roiled the share price, and expectations. The launch last May of a Delisting Proposal by the promoters when the shares were trading sub Rs. 90/share led to a rally in the shares which could not even track peer stock performance, and when the Delisting Proposal failed, shares dropped to a dramatically low level, despite the fact that Vedanta owned its shareholders a substantial dividend from the pay-through of dividends from Hindustan Zinc (HZ IN). As commodity prices continued to rally, and VEDL paid a big dividend in October 2020, it looked like the time to double-up. Everyone "knew" the promoters were willing to pay 40-50% than the post-Delisting Proposal failure to take the whole thing private. I expected a buyback. 10 days after the CEO said "we have no plans to buy more shares" we got an off-market block purchase of 5% by the promoters in December at Rs 160, followed a couple of weeks later by a proposed Open Offer to buy another 10%, which was later upsized and up-priced - by 47%, and still the Promoters could only get 10% of the 17.5% they sought to buy. A month on from that and the shares are nearly 10% higher than the Open Offer Price while a Peer Basket is largely unchanged from two months back. This means VEDL shares are again (as they were just before  at their high point against Peers since pre-pandemic. The current situation of covid-19 and variant spread in India is terrible and one could imagine that some drastic measures may still be taken to contain the spread, which could slow down the economy dramatically. The 70% catchup vs peers to reach the December 2019 level (as of post-Delisting Proposal failure) has now been caught up. The VEDL 2-3yr forward EV/EBIT ratio is now less than 1 turn from its long-term average spread to peers. More below the fold.  

Vedanta Now Caught Up With Peers - A Different Skew Ahead

The promoter's Open Offer to buy up to 651mm shares (17.51%) of <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> at Rs 235/share is coming to a close. With two days to go, the shares today closed at Rs. 231.75/share as <a href="https://www.smartkarma.com/entities/hindustan-zinc-ltd" target="_blank" data-smartkarma-citation="entities:8688:1" rel="noopener">Hindustan Zinc (HZ IN)</a> closed up 6.07%, briefly touching Rs 300/share intraday. As of the close of 5 April, there were just 3,364 Orders (different offers of shares at Rs 235.00 in the system) having offered a total of 112.76mm shares (81.44mm shares confirmed, 31.32mm shares yet to be confirmed). Shares may be at a 52-week high, not quite quadruple their covid-crash lows and not quite triple their post-Delisting Offer Failure lows on a dividend-adjusted price basis...<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/955/original/Screenshot+2021-04-05+at+9.09.20+PM.png?1617628176" class="editor-image img-responsive" data-smartkarma-image-id="198955"></figure></section>... but as readers may surmise in the charts and tables below the fold, VEDL is not terribly expensive vs peers or its own peer-relative history. And that is when it is still loaded with cash from a dividend it is supposed to but has not yet paid out. Given zinc prices, and commodity prices in general, and the dynamics of sooner-rather-than-later sale of the government's stake in <a href="https://www.smartkarma.com/entities/hindustan-zinc-ltd" target="_blank" data-smartkarma-citation="entities:8688:1" rel="noopener">Hindustan Zinc (HZ IN)</a>, one might expect a substantial dividend to make the post-sale optics look better/easier (there would be no reason for VEDL to pay a multiple of book of cash or debt in the HZ accounts). There may be antics in the next day or two. There have been antics on this stock grouping before which appear to have been aimed at helping undecided investors make a decision about the risk of holding shares. I would not be surprised to see that again. Much more below the fold.<hr>Earlier insights in the series, from older to most recent, are at the links below:<table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 103.2px;"><h3>The Post Delisting Offer History of Insights on VEDL</h3></td></tr>
<tr>
<td style="width: 103.2px;">Date</td>
<td style="width: 600.8px;">Title</td>
</tr>
<tr>
<td style="width: 103.2px;">11 Oct 2020</td>
<td style="width: 600.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-delisting-proposal-offer-fails-we-think" target="_blank" data-smartkarma-citation="insights:44060" rel="noopener">Vedanta Delisting Proposal/Offer Fails (We Think)</a> </td>
</tr>
<tr>
<td style="width: 103.2px;">13 Oct 2020</td>
<td style="width: 600.8px;"><a href="https://www.smartkarma.com/insights/vedl-delisting-fail-day1-reading-between-the-lines-of-the-trading-data" target="_blank" rel="noopener">VEDL Delisting Fail Day1 - Reading Between the Lines of the Trading Data</a></td>
</tr>
<tr>
<td style="width: 103.2px;">21 Oct 2020</td>
<td style="width: 600.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-limited-caught-in-economic-purgatory-but-governance-hell" target="_blank" data-smartkarma-citation="insights:44350" rel="noopener">Vedanta Limited - Caught in Economic Purgatory but Governance Hell?</a> </td>
</tr>
<tr>
<td style="width: 103.2px;">9 Dec 2020</td>
<td style="width: 600.8px;"><a href="https://www.smartkarma.com/insights/vedanta-vaulting-near-2020-highs-on-higher-commods-higher-forecasts-but-open-offer-remote" target="_blank" data-smartkarma-citation="insights:45511" rel="noopener">Vedanta Vaulting Near 2020 Highs On Higher Commods, Higher Forecasts, But Open Offer Remote?</a></td>
</tr>
<tr>
<td style="width: 103.2px;">23 Dec 2020</td>
<td style="width: 600.8px;"><a href="https://www.smartkarma.com/insights/vedanta-promoter-launches-offer-to-buy-4-98" target="_blank" data-smartkarma-citation="insights:46600" rel="noopener">Vedanta Promoter Launches Offer to Buy 4.98%</a></td>
</tr>
<tr>
<td style="width: 103.2px;">11 Jan 2021</td>
<td style="width: 600.8px;"><a href="https://www.smartkarma.com/insights/vedanta-vedl-in-promoter-to-launch-an-open-offer-to-buy-more" target="_blank" data-smartkarma-citation="insights:46922" rel="noopener">Vedanta (VEDL IN) Promoter To Launch an Open Offer To Buy More</a></td>
</tr>
<tr>
<td style="width: 103.2px;">19 Feb 2021</td>
<td style="width: 600.8px;"><a href="https://www.smartkarma.com/insights/vedanta-soars-beyond-indicative-open-offer-level-not-expensive" target="_blank" data-smartkarma-citation="insights:48342" rel="noopener">Vedanta Soars Beyond Indicative Open Offer Level. Not Expensive</a></td>
</tr>
<tr>
<td style="width: 103.2px;">13 Mar 2021</td>
<td style="width: 600.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-vedl-awaits-open-offer-revision-now-less-event-y-more-commodity-y" target="_blank" data-smartkarma-citation="insights:49017" rel="noopener">Vedanta (VEDL) Awaits Open Offer Revision. Now Less Event-y More Commodity-y</a> </td>
</tr>
<tr>
<td style="width: 103.2px;">17 Mar 2021</td>
<td style="width: 600.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-vedl-open-offer-raised-in-price-and-size" target="_blank" data-smartkarma-citation="insights:49279" rel="noopener">Vedanta (VEDL) Open Offer Raised in Price and Size!</a> </td>
</tr>
</tbody></table>

The promoter's Open Offer to buy up to 651mm shares (17.51%) of Vedanta Ltd (VEDL IN) at Rs 235/share is coming to a close. With two days to go, the shares today closed at Rs. 231.75/share as Hindustan Zinc (HZ IN) closed up 6.07%, briefly touching Rs 300/share intraday. As of the close of 5 April, there were just 3,364 Orders (different offers of shares at Rs 235.00 in the system) having offered a total of 112.76mm shares (81.44mm shares confirmed, 31.32mm shares yet to be confirmed). Shares may be at a 52-week high, not quite quadruple their covid-crash lows and not quite triple their post-Delisting Offer Failure lows on a dividend-adjusted price basis...... but as readers may surmise in the charts and tables below the fold, VEDL is not terribly expensive vs peers or its own peer-relative history. And that is when it is still loaded with cash from a dividend it is supposed to but has not yet paid out. Given zinc prices, and commodity prices in general, and the dynamics of sooner-rather-than-later sale of the government's stake in Hindustan Zinc (HZ IN), one might expect a substantial dividend to make the post-sale optics look better/easier (there would be no reason for VEDL to pay a multiple of book of cash or debt in the HZ accounts). There may be antics in the next day or two. There have been antics on this stock grouping before which appear to have been aimed at helping undecided investors make a decision about the risk of holding shares. I would not be surprised to see that again. Much more below the fold.Earlier insights in the series, from older to most recent, are at the links below:
The Post Delisting Offer History of Insights on VEDL

Date
Title


11 Oct 2020

Vedanta Delisting Proposal/Offer Fails (We Think) 


13 Oct 2020
VEDL Delisting Fail Day1 - Reading Between the Lines of the Trading Data


21 Oct 2020

Vedanta Limited - Caught in Economic Purgatory but Governance Hell? 


9 Dec 2020
Vedanta Vaulting Near 2020 Highs On Higher Commods, Higher Forecasts, But Open Offer Remote?


23 Dec 2020
Vedanta Promoter Launches Offer to Buy 4.98%


11 Jan 2021
Vedanta (VEDL IN) Promoter To Launch an Open Offer To Buy More


19 Feb 2021
Vedanta Soars Beyond Indicative Open Offer Level. Not Expensive


13 Mar 2021

Vedanta (VEDL) Awaits Open Offer Revision. Now Less Event-y More Commodity-y 


17 Mar 2021

Vedanta (VEDL) Open Offer Raised in Price and Size! 



Vedanta (VEDL) Offer Coming To A Close: Watch For Antics

Late last night India time and into this morning HKT, Vedanta Resources <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/4f8390e6-f5a9-4fe2-8827-9b2f68c7c667.pdf" target="_blank" rel="noopener">announced</a> an Announcement cum Corrigendum to Public Announcement, Detailed Public Statement and the Draft Letter of Offer which will be published today.On December 23, less than two weeks after the CEO said on public TV they had no plans to buy any more of <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a>, Vedanta Resources bought 4.98% of <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> in a block at Rs. 160/share. That capped what they could buy during the fiscal year under the creeper rule. On January 9, Vedanta Resources announced an Open Offer to buy 371,750,500 shares at Rs 160.00 apiece. Shares were already 10+% higher and commodity prices were soaring so it was likely they would need to pay up as discussed in several insights since. Just over two weeks ago, Vedanta Resources issued US$1.2bn of a bond designed where use of proceeds included paying for the Open Offer and other things. That US$1.2bn converted to rupees, if completely spent on VEDL shares would mean Rs 235.00.Last weekend I wrote that I didn't expect them to go that high, so upside from here was less event-y and more commodity-y.[Narrator:  They went that high]<h3>The NEW News</h3>Late last night, in its new announcement amending the Draft Letter of Offer, Vedanta Resources upped the size of its offer from 371.75mm shares (10.00%) to 651mm shares (17.51%) and raised the price from Rs 160/share to Rs 235/share which means a total payment of Rs 152.985 billion, which is US$2.11bn.It's on. The change in price is big. The change in size changes the risk parameters.Much more discussion below.

Late last night India time and into this morning HKT, Vedanta Resources announced an Announcement cum Corrigendum to Public Announcement, Detailed Public Statement and the Draft Letter of Offer which will be published today.On December 23, less than two weeks after the CEO said on public TV they had no plans to buy any more of Vedanta Ltd (VEDL IN), Vedanta Resources bought 4.98% of Vedanta Ltd (VEDL IN) in a block at Rs. 160/share. That capped what they could buy during the fiscal year under the creeper rule. On January 9, Vedanta Resources announced an Open Offer to buy 371,750,500 shares at Rs 160.00 apiece. Shares were already 10+% higher and commodity prices were soaring so it was likely they would need to pay up as discussed in several insights since. Just over two weeks ago, Vedanta Resources issued US$1.2bn of a bond designed where use of proceeds included paying for the Open Offer and other things. That US$1.2bn converted to rupees, if completely spent on VEDL shares would mean Rs 235.00.Last weekend I wrote that I didn't expect them to go that high, so upside from here was less event-y and more commodity-y.[Narrator:  They went that high]The NEW NewsLate last night, in its new announcement amending the Draft Letter of Offer, Vedanta Resources upped the size of its offer from 371.75mm shares (10.00%) to 651mm shares (17.51%) and raised the price from Rs 160/share to Rs 235/share which means a total payment of Rs 152.985 billion, which is US$2.11bn.It's on. The change in price is big. The change in size changes the risk parameters.Much more discussion below.

Vedanta (VEDL) Open Offer Raised in Price and Size!

India

Hindustan Zinc Limited specializes in the exploration, mining and smelting of zinc, lead and other non-ferrous metals.  The Company's products include zinc ore, lead zinc concentrate, zinc metal, lead metal, cadmium metal, silver metal and sulfuric acid.

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Hindustan Zinc (HZ IN)

Vedanta To Eliminate Its ADRs - Creates VERY Interesting Possibilities

VEDL is going to eliminate its ADS. This is not benign. For anyone. Near-term or short-term. There are opportunities in the interim.

Travis Lundy

Chinese Indexes Headed Higher; Actionable Themes: Transportation, Materials, and Services

The evidence continues to suggest that value remains leadership and we recommend adding exposure to cyclical value on this minor pullback in the...

Vermilion Research

Vedanta Now Caught Up With Peers - A Different Skew Ahead

VEDL has been a rocket the last several months. And it still "owes" dividends of ~Rs 24/share to its shareholders. HZL results were salutary, but...

Travis Lundy

Vedanta (VEDL) Offer Coming To A Close: Watch For Antics

The VEDL Open Offer for Promoters to Buy 17% of TSO is coming to a close. Watch for antics on price in the last 2 days as the shares go ex-tender....

Travis Lundy

Vedanta (VEDL) Open Offer Raised in Price and Size!

Vedanta Resources has raised its Open Offer Price (235 vs 160) and size (17.5 vs 10%). This is likely to get done to the full extent or close to...

Travis Lundy

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