Daily BriefsMost Read

Most Read: Vedanta Ltd, Keppel DC REIT, Allstate Corp, Simcere Pharmaceutical Group and more

In today’s briefing:

  • Vedanta – Someone Is Playing Silly Buggers But Even On The Last Day Investor Strategy Matters
  • Vedanta SellDown – Probably Futures
  • STI Index Rebalance: In the Race to Replace CCT, Finally Some Daylight Emerges
  • Root Inc IPO Preview – The Next Snowflake?
  • Simcere Pharmaceutical IPO Initiation: A Rough Patch?

Vedanta – Someone Is Playing Silly Buggers But Even On The Last Day Investor Strategy Matters

By Travis Lundy

As of the close today, 20% of the remaining 49.9-ish % of shares out in Vedanta Ltd (VEDL IN) have been tendered, and a look at the structure of the shareholder base and the prices tendered early on may offer (with some degree of accuracy) an idea of how much more WILL be tendered, how much more MAY be tendered, and how that gets us to 90%. 

Looking at the structure of the Bid Details is also informative. 

Together, this provides information on the best price to place your Bids if you have yet to place them. Watching this through the day may provide some information on what result is likely by day end and therefore whether or not it is worth a trade in the shares realtime. 

There is a lot of information lying around if you know where to pick it up.

More 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&A Guide Quiddity India M&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 
4 Oct 2020 Vedanta Ltd  Vedanta Limited Reports Results: KEY Info on Deal Funding Embedded 
8 Oct 2020 Vedanta Ltd  Vedanta SellDown – Probably Futures 

Vedanta SellDown – Probably Futures

By Travis Lundy

Today’s move lower in Vedanta Ltd (VEDL IN) on Day 3 of the five-day Reverse Book Build auction to determine a Discovered Price in the Delisting Offer process caught many by surprise. It certainly surprised me. 

There are a number of factors which might be blamed for the move on outsized volume, and some are discussed below. One culprit is one or more futures sellers liquidating large size in what should have been a quiet day. There were lots of comments that there may have been shenanigans involved. 

The question “where should this fall if the deal breaks?” was on everyone’s minds.

The answer is… difficult.

VEDL has underperformed a basket of its peers by 18% year-to-date as of the 7 October close. And by more than that since the end of February 2020. VEDL is cheap to peers despite debt, so the other question is…

What kind of governance discount is really required? 

Much more 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&A Guide Quiddity India M&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 
4 Oct 2020 Vedanta Ltd  Vedanta Limited Reports Results: KEY Info on Deal Funding Embedded 

STI Index Rebalance: In the Race to Replace CCT, Finally Some Daylight Emerges

By Brian Freitas

After going neck and neck for the last few months, Keppel DC REIT (KDCREIT SP) and Frasers Logistics & Industrial Trust (FLT SP) are still locked in the race to replace Capitaland Commercial Trust (CCT SP) in the FTSE Straits Times Index (STI) (STI INDEX).

This follows the merger of Capitaland Mall Trust (CT SP) and Capitaland Commercial Trust (CCT SP) (both index constituents) to form a new entity named ‘CapitaLand Integrated Commercial Trust’. The new entity will remain in the FTSE Straits Times Index (STI) (STI INDEX) with an increased number of shares in issue and an adjusted investability weight.

With Capitaland Commercial Trust (CCT SP)‘s expected last trading day as 16 October, FTSE Russell should announce the replacement stock in the coming week. Using closing prices from 9 October, Keppel DC REIT (KDCREIT SP) is 2.6% ahead of Frasers Logistics & Industrial Trust (FLT SP) by full market cap and holds the edge going into next weeks’ trading.

With over 2 days of estimated buying on both names, there will be limited time for passive funds to rebalance their portfolios and there could be a big move on the stock that replaces Capitaland Commercial Trust (CCT SP)

There could be one more change at the regular rebalance in December. Sembcorp Industries (SCI SP) is at risk of deletion following the drop in its market cap following the Sembcorp Marine (SMM SP) spinoff. The replacement candidate will most likely be the stock not chosen as CCT’s replacement in the ad hoc review.


Root Inc IPO Preview – The Next Snowflake?

By Douglas Kim

Root Inc is getting ready to complete its IPO in the NASDAQ exchange in the next few weeks. Root Inc is an insurtech company that operates through a mobile app that uses smartphone technology, telematics, and data science to provide auto and home insurance. Since the founding of the company, Root has raised a total of $523 million in funding. It was last valued at $3.65 billion in September 2019 in a round led by ST Global and Coatue. Root is targeting about $6 billion valuation in this IPO. You can read Root Inc’s S-1 here. 

Surging revenue & rapid improvement in net margins – The company’s revenues have exploded higher in the past three years. In 2019, the company generated revenue of $290.2 million (up 570% YoY) while its total operating expenses increased by 393% YoY. A combination of a much higher revenue growth rate than operating expenses has resulted in a rapid improvement in net margins, which improved from -159.6% in 2018, -97.3% in 2019, and -58.9% in 1H 2020.

Root Inc’s exploding revenue growth and improvement in the reduction of net losses is very impressive, in the ranks of Snowflake Inc (SNOW US)

Although Snowflake and Root compete in different industry segments, both are SaaS companies with exceptional sales growth and significant operating leverage going forward. Similar to Snowflake, the word “WOW” came to my mind in reading through Root’s IPO prospectus. Root Inc could be one of those exceptional, highly disruptive SaaS companies that even the great value investors such as Warren Buffett could inject significant amounts of capital (similar to Snowflake).


Simcere Pharmaceutical IPO Initiation: A Rough Patch?

By Arun George

Simcere Pharmaceutical Group (SIMCERE HK) is engaged in the R&D, production and commercialisation of pharmaceuticals and is primarily focused on generic pharmaceuticals. The products are focused on three main therapeutic areas which are oncology (including cell therapy), central nervous system diseases and autoimmune diseases. Simcere will shortly launch a Hong Kong IPO to raise $500 million, according to press reports.  

The timing of the IPO is not ideal as Simcere is coming off a weak 1H20. However, for investors willing to look past the 2020 results, Simcere is putting in place the right measures to ensure that the 1H20 was an exception rather than the rule. 


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