For Vedanta promoters, there persist bigger challenges going ahead. Their efforts to acquire shares from retail investors through buyback has failed to muster enough support, as such, unraveling challenges in the near future. Analysts have picked a few of which capital allocation will be a dominating issue for investors as well instead of Vedanta’s performance.

Share Market Live

NSE

On Saturday, Vedanta had announced that its promoter, Vedanta Resources Ltd (VRL), deemed the delisting offer to have failed with 12.55 crore shares tendered, lower than the required shares to reach the 90 percent trigger limit. For a successful delisting, 134.12 crore shares needed to have been validly tendered for promoter shareholding to cross 90 percent.

“Even if a higher number of shares were tendered, the discovered price as per the bids would have implied a higher cash outgo ($7.8 billion) versus the fund raised by VRL ($3.15 billion), but VRL would have the option to make a counter offer,” CLSA said in a note.

CLSA now expects a high dividend payout by Vedanta Ltd which would be positive for minority shareholders, an increase in inter-company loans to VRL (negative for minority shareholders) or relaunching delisting process/open offer and/or business as usual for now.

In its FY20 annual report, VRL highlighted that it intended to reduce the dividend required from subsidiaries by extending an inter-company loan from an operating subsidiary.

Last week, Vedanta founder Anil Agarwal told CNBC-TV18 that public shareholders had tendered the required number of shares and that the company would consider a counteroffer "if need be".

Also Read: Vedanta Delisting FAQs: Is it necessary to participate, what happens in case of failure?

Given the high leverage at VRL, there is a lack of clarity on what happens next, CLSA said. VRL has standalone debt of $6.7 billion, and of this a term loan of $1/1.4 billion is due in FY21/22. Near term debt maturity for VRL can be met by inter-company loans from Vedanta ($1 billion announced in 1Q results).

While the brokerage expects the stock to react negatively in the near term, going forward it will depend on how management looks to ease debt both at Vedanta and VRL.

CLSA maintained Outperform rating on the stock and cut the target price to Rs 118 from Rs 133.

(Edited by : Abhishek Jha)