Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p>Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.</p><ul><li><a href='#lucror-entity-2312'>Alam Sutera Realty</a></li><li><a href='#lucror-entity-13022'>Anton Oilfield</a></li><li><a href='#lucror-entity-6159'>China SCE</a></li><li><a href='#lucror-entity-227'>Guangzhou R&F Properties</a></li><li><a href='#lucror-entity-18561'>JSW Steel Ltd</a></li><li><a href='#lucror-entity-20844'>Medco Energi</a></li><li><a href='#lucror-entity-28672'>Powerlong Commercial Management Holdings</a></li><li><a href='#lucror-entity-8898'>Sino Ocean Land</a></li><li><a href='#lucror-entity-22202'>Vedanta Resources</a></li><li><a href='#lucror-entity-5519'>Suzhou Boamax Tech Group</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Alam Sutera RealtyAnton OilfieldChina SCEGuangzhou R&F PropertiesJSW Steel LtdMedco EnergiPowerlong Commercial Management HoldingsSino Ocean LandVedanta ResourcesSuzhou Boamax Tech Group

Morning Views Asia: Alam Sutera Realty, Anton Oilfield, China SCE, Guangzhou R&F Properties

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Late last evening, <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 an <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/172a3c4a-d43e-455e-ab32-24995981d75b.pdf" target="_blank" rel="noopener">announcement</a> to the Stock Exchanges said that its promoter <a href="https://www.smartkarma.com/entities/vedanta-resources-limited" target="_blank" data-smartkarma-citation="entities:22202:1" rel="noopener">Vedanta Resources (VED LN)</a> had informed them that the Delisting Offer was deemed to have failed.</p><p>With just over 1.34bn shares needing to be tendered in the Reverse Book Building (RBB) process for the Promoters to reach a 90% shareholding, there were almost 1.378bn shares tendered. However, the number of confirmed shares was only 1.255bn which meant that the 90% threshold was not reached.</p><p>With the delisting having failed, shares that were tendered in the RBB process need to be returned within 10 working days. The stock will come under pressure on Monday with a final selloff once the locked up shares are released. With the futures in ban period, it is extremely difficult for investors to hedge their position.</p><p>The ADR <a href="https://www.smartkarma.com/entities/sesa-sterlite-ltd-adr" target="_blank" data-smartkarma-citation="entities:10972:1" rel="noopener">Vedanta Ltd (VEDL US)</a> had closed 7.74% lower on Friday, implying a local price of INR 109/share versus a close of INR 121.85/share on <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> on Friday.</p><p>In his Insight, we look at the numbers from the RBB process and try to figure out why the Delisting failed and what it could mean for the stock and <a href="https://www.smartkarma.com/entities/vedanta-resources-limited" target="_blank" data-smartkarma-citation="entities:22202:1" rel="noopener">Vedanta Resources (VED LN)</a> going forward.</p>

Late last evening, Vedanta Ltd (VEDL IN) in an announcement to the Stock Exchanges said that its promoter Vedanta Resources (VED LN) had informed them that the Delisting Offer was deemed to have failed.With just over 1.34bn shares needing to be tendered in the Reverse Book Building (RBB) process for the Promoters to reach a 90% shareholding, there were almost 1.378bn shares tendered. However, the number of confirmed shares was only 1.255bn which meant that the 90% threshold was not reached.With the delisting having failed, shares that were tendered in the RBB process need to be returned within 10 working days. The stock will come under pressure on Monday with a final selloff once the locked up shares are released. With the futures in ban period, it is extremely difficult for investors to hedge their position.The ADR Vedanta Ltd (VEDL US) had closed 7.74% lower on Friday, implying a local price of INR 109/share versus a close of INR 121.85/share on Vedanta Ltd (VEDL IN) on Friday.In his Insight, we look at the numbers from the RBB process and try to figure out why the Delisting failed and what it could mean for the stock and Vedanta Resources (VED LN) going forward.

Vedanta (VEDL IN): A Failed Delisting Will Now Pressure The Stock

Lakshmi Iyer, CFA

<p>The reverse book building in connection with the privatization 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> commenced yesterday. In this Insight, we present our views on implications for bondholders. We feel there is significant upside in the bonds even if the deal happens at a higher price. We also provide our views on what levels of additional debt will be a deal breaker, given the overall <a href="https://www.smartkarma.com/entities/vedanta-resources-limited" target="_blank" data-smartkarma-citation="entities:22202:1" rel="noopener">Vedanta Resources (VED LN)</a> balance sheet.</p><div class="content-highlight"><p><em>Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.</em></p></div>

The reverse book building in connection with the privatization of Vedanta Ltd (VEDL IN) commenced yesterday. In this Insight, we present our views on implications for bondholders. We feel there is significant upside in the bonds even if the deal happens at a higher price. We also provide our views on what levels of additional debt will be a deal breaker, given the overall Vedanta Resources (VED LN) balance sheet.Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.

Vedanta - Ongoing Privatization - Implications for Bondholders

Trung Nguyen

<p><br/> The Q1/20-21 results from Vedanta Limited (VEDL) were in line with expectations, considering the negative impact of COVID-19. Leverage increased slightly but remains low for VEDL with Net Debt/EBITDA at 1.2x, while we estimate Net Debt/EBITDA for Vedanta Resources Limited (VRL) is a weak 3.75x. Liquidity at VEDL remains adequate, and its privatisation remains a key near-term credit driver.<br/><br/> Having raised USD 3.15 bn in funds, VRL can afford to buy out all the minority investors at c. INR 127-140/share. That said, it only needs to buy at least 90% of the voting rights, and VEDL has ADS with no voting rights. This means that VRL can pay as much as c. INR 170-175 for each of the common shares listed in India, or a 25-26% premium over Friday’s closing price. With early bids this morning around INR 138, we see a high likelihood that the discovered price will be at or below INR 175, allowing for the transaction to be completed with the cash and loan commitments on hand.<br/><br/> Overall, we expect: [1] the privatisation will succeed; [2] VRL's credit profile will improve due to the simpler corporate structure and more efficient cash upstreaming; and [3] the rating agencies will enact upgrades.<br/></p>

  The Q1/20-21 results from Vedanta Limited (VEDL) were in line with expectations, considering the negative impact of COVID-19. Leverage increased slightly but remains low for VEDL with Net Debt/EBITDA at 1.2x, while we estimate Net Debt/EBITDA for Vedanta Resources Limited (VRL) is a weak 3.75x. Liquidity at VEDL remains adequate, and its privatisation remains a key near-term credit driver.   Having raised USD 3.15 bn in funds, VRL can afford to buy out all the minority investors at c. INR 127-140/share. That said, it only needs to buy at least 90% of the voting rights, and VEDL has ADS with no voting rights. This means that VRL can pay as much as c. INR 170-175 for each of the common shares listed in India, or a 25-26% premium over Friday’s closing price. With early bids this morning around INR 138, we see a high likelihood that the discovered price will be at or below INR 175, allowing for the transaction to be completed with the cash and loan commitments on hand.   Overall, we expect: [1] the privatisation will succeed; [2] VRL's credit profile will improve due to the simpler corporate structure and more efficient cash upstreaming; and [3] the rating agencies will enact upgrades. 

Vedanta Resources - Event Flash - Q1 FY 2020-21 Results, Privatisation Update - Lucror Analytics

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>On the 30th of September, the <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> AGM took place to approve the audited financial results of the fiscal year ended 31 March and to re-appoint a certain number of directors. Voting results are linked <a href="https://www.bseindia.com/stock-share-price/vedanta-limited/vedl/500295/voting-results/" target="_blank" rel="noopener">here</a>. </p>
<p>On 1 October, <strong>Vedanta Limited</strong> reported that the promoters Vedanta Resources Limited and its indirect subsidiaries namely, Vedanta Holdings Mauritius Limited and Vedanta Holdings Mauritius II Limited, had, with the assistance of its agent KFin Technologies Private Limited, completed the dispatch of <a href="https://www.bseindia.com/xml-data/corpfiling/AttachHis/0a3309f5-7c2a-4b9e-9d5c-90c16c541dba.pdf" target="_blank" rel="noopener">Letter of Offer</a> to all public shareholders.</p>
<p>2 October saw the <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/75e5b6d2-92f5-40f7-85bf-12a8e0cca785.pdf" target="_blank" rel="noopener">announcements</a> of the Letter of Offer along with a minor corrigendum in the newspapers.</p>
<p>On 3 October, <strong>Vedanta Limited</strong> reported its Q1 financials on Saturday 3 October, some 9-10 weeks later than normal (since the 2010-2011 year, the latest Q1 financials had ever been released was 31 July), with no good reason for the delay noted. Results came in many forms: <a href="https://www.vedantalimited.com/InvestorReports/Standalone%20Results%20June%202020.pdf" target="_blank" rel="noopener">Standalone financials</a>, <a href="https://www.vedantalimited.com/InvestorReports/Consol%20Results%20June%202020.pdf" target="_blank" rel="noopener">Consolidated Financials</a>, and a <a href="https://www.vedantalimited.com/InvestorReports/VEDL%20Results%20Presentation%20Q1%20FY2021.pdf" target="_blank" rel="noopener">Presentation</a>, but unlike prior years, there is no transcript.</p>
<div class="content-highlight">
<p>There are some really interesting pieces of information in this set of financial reports, especially in the auditor's letter. </p>
<p><strong>It appears to tell you more about the possibilities of the Delisting Offer. </strong></p>
</div>
<p>I note that the Reverse Book Build Auction commences tomorrow 5 October and goes through 9 October. </p>
<p>Details below the fold. </p>
<section>
<div id="ember23824">
<hr>
<div>
<p><em>Insights previously published in the timeline of the Vedanta Delisting Offer are listed below.</em></p>
</div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="3" style="width: 724.8px;">
<h3>Relevant Insights To Date</h3>
</td>
</tr>
<tr>
<td style="width: 72px;"><strong>Date</strong></td>
<td style="width: 134.4px;"><strong>Theme or Ticker</strong></td>
<td style="width: 476.8px;"><strong>Insight Title</strong></td>
</tr>
<tr>
<td style="width: 72px;">2019</td>
<td style="width: 134.4px;">Indian M&amp;A Guide</td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/quiddity-india-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:30885" rel="noopener">Quiddity India M&amp;A Guide 2019</a> </td>
</tr>
<tr>
<td style="width: 72px;">24 May 2020</td>
<td style="width: 134.4px;">Delisting Offers</td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/indian-delisting-exit-offers-know-your-process-and-the-games-played" target="_blank" data-smartkarma-citation="insights:39683" rel="noopener">Indian Delisting/Exit Offers - Know Your Process and The Games Played</a> </td>
</tr>
<tr>
<td style="width: 72px;">19 Jun 2020</td>
<td style="width: 134.4px;">Failed Exit Offers</td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/failed-exit-offers-in-india-lessons-for-vedl-adani-and-hexw" target="_blank" data-smartkarma-citation="insights:40492" rel="noopener">Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW?</a> </td>
</tr>
<tr>
<td style="width: 72px;">27 May 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-delisting-offer-how-it-goes-from-here" target="_blank" data-smartkarma-citation="insights:39761" rel="noopener">Vedanta Delisting Offer - How It Goes From Here</a> </td>
</tr>
<tr>
<td style="width: 72px;">22 Jun 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-delisting-offer-opportunities-and-timing" target="_blank" data-smartkarma-citation="insights:40528" rel="noopener">Vedanta Delisting Offer: Opportunities and Timing</a> </td>
</tr>
<tr>
<td style="width: 72px;">25 Jun 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-buyout-loan-huge-hindustan-zinc-div-but-may-change-vedanta-rbb-timing" target="_blank" data-smartkarma-citation="insights:40653" rel="noopener">Vedanta Buyout Loan = HUGE Hindustan Zinc Div But May Change Vedanta RBB Timing</a> </td>
</tr>
<tr>
<td style="width: 72px;">14 Jul 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/putting-sightlines-on-the-vedanta-discovered-price" target="_blank" data-smartkarma-citation="insights:41236" rel="noopener">Putting Sightlines on the Vedanta Discovered Price</a> </td>
</tr>
<tr>
<td style="width: 72px;">18 Aug 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/putting-sightlines-on-the-vedanta-delisting-offer-timing" target="_blank" data-smartkarma-citation="insights:42260" rel="noopener">Putting Sightlines on the Vedanta Delisting Offer TIMING</a> </td>
</tr>
<tr>
<td style="width: 72px;">7 Sep 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-reaching-the-end-game" target="_blank" data-smartkarma-citation="insights:42969" rel="noopener">Vedanta: Reaching The End Game</a> </td>
</tr>
<tr>
<td style="width: 72px;">17 Sep 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-more-fuel-for-the-fire" target="_blank" data-smartkarma-citation="insights:43316" rel="noopener">Vedanta : More Fuel For The Fire</a> </td>
</tr>
<tr>
<td style="width: 72px;">21 Sep 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-vedl-cash-raised-money-flow-and-how-it-affects-delisting-offer-discovered-price" target="_blank" data-smartkarma-citation="insights:43429" rel="noopener">Vedanta (VEDL): Cash Raised, Money Flow, and How It Affects Discovered Price</a> </td>
</tr>
<tr>
<td style="width: 72px;">29 Sep 2020</td>
<td style="width: 134.4px;">
<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd</a> </td>
<td style="width: 476.8px;">
<a href="https://www.smartkarma.com/insights/vedanta-reverse-book-build-auction-it-s-on-and-the-schedule-from-here-is-tight" target="_blank" data-smartkarma-citation="insights:43694" rel="noopener">Vedanta Reverse Book Build Auction - It’s On And the Schedule From Here Is Tight</a> </td>
</tr>
</tbody>
</table>
</div>
</div>
</section>

On the 30th of September, the Vedanta Ltd (VEDL IN) AGM took place to approve the audited financial results of the fiscal year ended 31 March and to re-appoint a certain number of directors. Voting results are linked here. 
On 1 October, Vedanta Limited reported that the promoters Vedanta Resources Limited and its indirect subsidiaries namely, Vedanta Holdings Mauritius Limited and Vedanta Holdings Mauritius II Limited, had, with the assistance of its agent KFin Technologies Private Limited, completed the dispatch of Letter of Offer to all public shareholders.
2 October saw the announcements of the Letter of Offer along with a minor corrigendum in the newspapers.
On 3 October, Vedanta Limited reported its Q1 financials on Saturday 3 October, some 9-10 weeks later than normal (since the 2010-2011 year, the latest Q1 financials had ever been released was 31 July), with no good reason for the delay noted. Results came in many forms: Standalone financials, Consolidated Financials, and a Presentation, but unlike prior years, there is no transcript.

There are some really interesting pieces of information in this set of financial reports, especially in the auditor's letter. 
It appears to tell you more about the possibilities of the Delisting Offer. 

I note that the Reverse Book Build Auction commences tomorrow 5 October and goes through 9 October. 
Details below the fold. 




Insights previously published in the timeline of the Vedanta Delisting Offer are listed below.






Relevant Insights To Date



Date
Theme or Ticker
Insight Title


2019
Indian M&amp;A Guide

Quiddity India M&amp;A Guide 2019 


24 May 2020
Delisting Offers

Indian Delisting/Exit Offers - Know Your Process and The Games Played 


19 Jun 2020
Failed Exit Offers

Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW? 


27 May 2020

Vedanta Ltd 

Vedanta Delisting Offer - How It Goes From Here 


22 Jun 2020

Vedanta Ltd 

Vedanta Delisting Offer: Opportunities and Timing 


25 Jun 2020

Vedanta Ltd 

Vedanta Buyout Loan = HUGE Hindustan Zinc Div But May Change Vedanta RBB Timing 


14 Jul 2020

Vedanta Ltd 

Putting Sightlines on the Vedanta Discovered Price 


18 Aug 2020

Vedanta Ltd 

Putting Sightlines on the Vedanta Delisting Offer TIMING 


7 Sep 2020

Vedanta Ltd 

Vedanta: Reaching The End Game 


17 Sep 2020

Vedanta Ltd 

Vedanta : More Fuel For The Fire 


21 Sep 2020

Vedanta Ltd 

Vedanta (VEDL): Cash Raised, Money Flow, and How It Affects Discovered Price 


29 Sep 2020

Vedanta Ltd 

Vedanta Reverse Book Build Auction - It’s On And the Schedule From Here Is Tight 







Vedanta Limited Reports Results: KEY Info on Deal Funding Embedded

India

Vedanta Resources Limited operates as a diversified natural resource company. The Company extracts and process zinc, lead, aluminum, iron ore, copper, and silver, as well as focuses on oil and natural gas. Vedanta Resources serves clients worldwide.

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Vedanta Resources (VED LN)

Morning Views Asia: Alam Sutera Realty, Anton Oilfield, China SCE, Guangzhou R&F Properties

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Vedanta (VEDL IN): A Failed Delisting Will Now Pressure The Stock

With the Vedanta Delisting Offer having failed, we take a look at why it failed and what it could mean for the stock going forward.

Brian Freitas

Vedanta - Ongoing Privatization - Implications for Bondholders

The privatization exercise of Vedanta Ltd (VEDL IN) commenced yesterday. We present our

Lakshmi Iyer, CFA

Vedanta Resources - Event Flash - Q1 FY 2020-21 Results, Privatisation Update - Lucror Analytics

The Q1/20-21 results from Vedanta Limited (VEDL) were in line with expectations, considering the negative impact of COVID-19. Leverage increased...

Lucror Analytics

Vedanta Limited Reports Results: KEY Info on Deal Funding Embedded

$Vedanta Limit

Travis Lundy

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