Daily BriefsMost Read

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

In today’s briefing:

  • Vedanta (VEDL IN): A Failed Delisting Will Now Pressure The Stock
  • Vedanta Delisting Proposal/Offer Fails (We Think)
  • STI Index Rebalance: In the Race to Replace CCT, Finally Some Daylight Emerges
  • A Different Angle – Simcere Pharmaceutical VS Everest Medicines (01952.HK)
  • TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) – Two Stocks To Buy

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

By Brian Freitas

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 Delisting Proposal/Offer Fails (We Think)

By Travis Lundy

Late Saturday night Vedanta Ltd (VEDL IN) released an announcement to the BSE and NSE that the biggest Delisting Offer in Indian history had failed. 

Regulation 19 (1) of the Delisting Regulations noted above is that either they did not get enough shares, or the Promoter got enough shares and rejected the price. In this case, as the next page of the announcement shows, they did not get enough shares. The required number of shares to reach 90% to trigger a Discovered Price was 1.341bn but the number of confirmed bid shares submitted was 1.2547bn shares. An additional 123.19mm shares had been submitted, taking the total to 1.378bn, which would have passed the hurdle, but those shares were not confirmed by bankers and custodians before the deadline. 

It was reported that the bankers DAM Capital and JP Morgan were seeking to extend the Delisting Offer for an extra day because of both the BSE outage Friday and the matter of some brokers only allowing bids at the Floor Price (reported Thursday). The BSE had already extended the hours of the Delisting Offer to 7pm Indian Standard Time, and this was seen to be helping. Apparently the bankers were not successful at the time. 

This will likely cause an unwind. This will hurt the price.

But wait…

An article put out by PTI (Press Trust of India) and syndicated across severalnewspapers has a quote saying…

Sources privy to the development said Vedanta is now exploring with regulatory authorities if the reverse book building period could be extended by one day.

There is still a chance, and while I thought VEDR should have had the extra day, I do not know that SEBI will give them the extra day now that the result has been announced. I would be surprised if they get the extra day.

More about the size of the unwind, the “fair” price vs comps, and possible mitigants 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 
9 Oct 2020 Vedanta Ltd  Vedanta – Someone Is Playing Silly Buggers But Even On The Last Day Investor Strategy Matters 

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.


A Different Angle – Simcere Pharmaceutical VS Everest Medicines (01952.HK)

By Xinyao (Criss) Wang

Everest Medicines was listed in Hong Kong stock market on October 9, 2020 and closed at HK$72.75 (up 32.27% on the first day) . From the establishment of the Company to IPO, Everest Medicines only took 39 months. To some extent, the listing of Everest Medicines means that the license-in business model once again came to the center of the capital world (one precedent was Zai Lab). Another traditional generic pharmaceutical company, Simcere Pharmaceutical, also plans to IPO in Hong Kong in the near future. Simcere is famous for its sales capacity and is actively seeking transformation in recent years. It is also the epitome of a large number of traditional generic pharmaceutical enterprises in China. At this moment, it is still too early to tell whether the old brand traditional pharmaceutical enterprises can revive or which kind of business model can win the future market. 


TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up (October 2020) – Two Stocks To Buy

By Janaghan Jeyakumar, CFA

Tachiaigai Bunbai Offerings are the most common “Pre-event” indicators for TOPIX Inclusion Events. 

A tachiaigai bunbai Offering is where a company sells newly issued or secondary shares (usually from a controlling shareholder) to the public (Off-market), with a limit placed on the maximum quantity per subscriber, most often with the intention of increasing the number of shareholders, public float percentage, and/or the market capitalization of the public float in order to meet TSE1 Section Transfer requirements.

In June 2020, I published an insight (TOPIX Inclusion Pre-Events: Recent “Tachiaigai Bunbai” Round-Up) covering a list of stocks that had made announcements relating to tachiaigai bunbai offerings in the 30 days leading to the date of publication. 

Since then, 30 companies have made announcements relating to tachiaigai bunbai offerings. 

In this insight, we take a look at the details of these offerings, the likelihood of these candidates being promoted to TSE1, and the upside potential of these events. 


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