By Sanjeev Sharma New Delhi, Oct 4 : The promoters of Vedanta have tried many tricks to keep expectation of public shareholders muted, proxy advisory firm, Stakeholders Empowerment Services (SES) said as the company initiates the final step of delisting. Vedanta Resources Ltd (VRL) has given a public announcement to kick start the Reverse Book Building (RBB) process in order to delist Vedanta Ltd (Vedanta) from stock exchanges. The bidding commences on October 5 and closes on October 9. SES has said, "Investors must ignore floor price, book value and 52-week low price as the same does not reflect true value of Vedanta shares". "While, SES has given guidance as to what is a fair bidding price. However, it is up to the shareholders to do proper analysis and not succumb to negative news floating around. Promoters of the Company are experienced businessmen and would love to minimize cost of acquisition. It is well within their rights to do so," it said in its advisory to shareholders. "And shareholders also have their right to seek a fair price, it is on this point there is a conflict between promoter and public shareholders. Shareholders must protect their value," SES said. SES in its report titled 'Vedanta Delisting Offer' dated May 13 has termed the delisting proposal of VRL as being opportunistic and unfair as the offered price at Rs 87.50/- per share is well below the fair value of Vedanta. SES advice of SES to shareholders is that, do not be guided by what is floor price, what is book value given, what is market price or what is their purchase price. "Just remember one thing that, you must offer shares at a price which you feel is fair. Please also do not be afraid that if you offer a higher price and delisting happens at a price lower than what you offered, you may be left out. No, not at all, as SEBI Delisting Regulations guarantees that the acquirer must offer to buy shares from all remaining shareholders at discovered price in case delisting offer is successful," SES said. SES said the promoters have tried many tricks to keep expectation of public shareholders muted. This includes indicative price at Rs 87.50, floor price at Rs 87.25, write off of Rs 17,400 crore resulting in consolidated book value less than Rs 90. SES adds it did not pass HZL dividend to shareholders, although promised in Dividend Distribution Policy (DDP). SES said it is age old technique that if you want to buy something, first undervalue and then create negative environment so that seller is convinced that the thing is not valuable, here shareholders are motivated to tender their share at throw away price. SES asks if the write-offs amounting to Rs 17,400 crore were genuine or an accounting gimmick? While, the Investors Presentation and conference calls transcripts and Annual Report presented a very rosy picture of the state of affairs of the Company, the company wrote off almost Rs 17,400 crore (Rs 15,900 crore owing to Oil & Gas alone) which was more than 40 per cent of the then market capitalization of Vedanta of Rs 39,000 crore. The write-off was announced on June 6 and market reaction was absolutely unperturbed to say the least. SES is of the opinion that a huge write off generally results in share price to plunge almost immediately, however, the market realized that write off is not a cash loss, but a mere book loss. And does not impact going concern assumption of business, it is mere revaluation. The question is what was the need to write off? The Company in its own presentation has stated that in Oil Business at Brent Oil Price of $40 per barrel will give IRR of 35 per cent. Therefore, long term effect of write off is not there. Further, the global oil prices have recovered from its decade lows in March 2020, and are trading at approximately $40 per barrel currently, will the Company write back the impairment? "To SES, write off was aimed to cause negative sentiment," it said. One of the jewels in the crown that needs to be given more attention is the cash rich Hindustan Zinc Ltd (HZL). The present market capitalization of HZL is more than Rs 85,000 crore. Based on the market cap of HZL, the value of HZL embedded in Vedanta is approximately Rs 55,000 crore, translating into? 148 per equity share, almost 70 per cent higher to Floor price and 65 per cent higher to book value. SES said that Vedanta shares have unpaid HZL dividend of Rs 12.18/share, which promoters have not paid to its shareholders In May, HZL paid dividend amounting to close to Rs 7,000 crore to its shareholders, out of which approximately Rs 4,500 crore was received by Vedanta. According to the Dividend Distribution Policy of the Company, entire dividend received by Vedanta from HZL (other than special dividend) is to be passed on to its own shareholders as it is. HZL has recently issued Non-Convertible Debentures (NCDs) and raised money to the tune of Rs 3,250 crore. "HZL being a cash surplus Company which pays hefty dividends to its shareholders, SES is unable to understand that why suddenly such significant amount of money is being raised through borrowings," the report said. To give perspective, only 4 months back, HZL had paid an interim dividend to its shareholders amounting to close to Rs 7,000 crore. "Therefore, SES is unable to comprehend that if the Company did require funds, then why did it declare Rs 7,000 crore of dividend in May. Either it is a case of absolute absurdity in financial management or is there a plan which shareholders are unaware?" it said. Was the dividend by HZL paid only shore up cash in Vedanta, SES has asked. This assumes importance since Vedanta did not pass on the dividend received from HZL to its shareholders, which is contrary to what is stated in the Dividend Distribution Policy of Vedanta. SES said assuming that Vedanta gets delisted this year, the entire dividend of Rs 4,500 crore will be taken by the Promoters, when approximately Rs 2,250 crore was to be passed on to the public shareholders of Vedanta. There is no sign of any sudden slump in the business of HZL. SES is of the opinion that the shareholders must seek answer from the Company regarding the sudden issuance of NCDs. Therefore, SES recommends that shareholders must offer their shares in keeping the range Rs 236 - Rs 310 in mind. Even if one offers a discount to highest price for uncertainties, depressed economic environment, etc and gives a discount of 20-30 per cent the fair range comes to be anywhere between Rs 200 - Rs 250 at least considering the value that is seen in the business. (Sanjeev Sharma can be contacted at sanjeev.s@ians.in) /IANS