🤔Curious Case of Vedanta's Share Surge
Share scrip of Vedanta Limited surged by ~15% in last 2 days after the semi-conductor plant announcement. But it might be some other company!
🚀 Share price of Vedanta Ltd. surged by almost 15% in the last two days
🤩 It was supposed to, as ‘Vedanta’ unveiled its plan to invest (with Foxconn) INR 1.54 Lakh Crores in a semi-conductor plant
❓But is ‘Vedanta’ the listed Vedanta Ltd?
😤 “Why is that even a question, Kanan? Obviously, it is!”
🤯 No, it most likely is not! Read on with me:
Vedanta Limited made a press release 📰 on its website 🧑🏻💻 on 14th February, 2022 stating:
”Vedanta and Foxconn Sign MOU for Manufacturing Semiconductors in India”1
Since Vedanta Limited (a listed company) having its own website makes such a disclosure,
It can be reasonably implied that the manufacturing would’ve been done by Vedanta Ltd itself
However, on being asked by the Stock Exchanges on more clarifications, the company replied:
”please note that the proposed business of manufacturing semiconductors is not under Vedanta Limited and we understand that it will be undertaken by the holding company of Vedanta Limited”2
This clearly meant that value won’t accrue to shareholders of Vedanta Limited
Since, Vedanta Resources Limited (holding company of Vedanta limited) is not under the structure of Vedanta Limited, no benefits will accrue to the share holders of Vedanta Limited
Just while writing this blog, the company has replied to another clarification sought by the exchanges saying:
”we reiterate that the proposed business of manufacturing semiconductors is not under Vedanta Limited and we understand that it will be undertaken by the ultimate holding company of Vedanta Limited, Volcan Investments Limited.“
The group chairman Sh. Anil Agarwal ji said in an interview hosted by CNBC saying that Vedanta Ltd will invest in the plant3
However, it seems that there is no confusion now.
15% rise in stock 📈 , i.e., more than INR 15,000 Cr increase in valuation for potentially no reason.
Also, sharing an interesting corporate governance tale-
Vedanta Ltd is a cash rich company 💸 but trades at a PE of <6 partially due to corporate governance discount.
The promoters tried to take undue advantage of the covid crash by proposing to delist the company.
Share price was 63 during covid lows and touched 52-week high of 441. Imagine the difference.
LIC, a shareholder of Vedanta Ltd, came to the rescue of the public shareholders and failed the ambitions of delisting.
In this case, what Vedanta Group might do is that, it will distribute dividends 💰 to its shareholders.
Majority shares in the Promoter group (as per BSE filings) are companies in Mauritius.
They will get dividends 💰 and will have to pay just 5% taxes as per India-Mauritius Treaty.
That dividends 💰 will be used to invest in manufacturing company of semi-conductors.
However, retail shareholders won’t enjoy the upside of this plant.
Even though the profits to invest come from your company.
This is not illegal, just seems slightly unethical!
A major reason why such cash rich companies 💸 trade at a significant discount is Corporate Governance.
It is very important for us to know how to identify such companies.
”But I am not a CA!” - You needn’t either be one.
All you need to learn is to read certain disclosures in the Annual Reports of these companies and observe corporate announcement.
🚀In our Fundamental Analysis Club, we have displayed how one could have discovered scrips like Satyam.
And saved themselves from such fraudulent companies
Say goodbye to shady management today:
If you are new to the stock markets, you may consider checking our Basics of Stock Markets club as well.
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🚨 Disclaimer: Shared for educational and discussion purposes only. Not investment advice. Please consult a SEBI Registered Investment Adviser before taking an investment decision
Please note that we have the highest regard for the promoter of the company who has rose up from nowhere to making an international cash rich company. The article has been shared to just share knowledge around investment awareness purposes
Source: https://www.vedantalimited.com/img/media_mentions/press_release/2022/Vedanta-and-Foxconn-sign-MOU-to-manufacture-semiconductors.pdf
Source: https://www.bseindia.com/xml-data/corpfiling/AttachHis/b64ec4cc-b43c-48ab-a801-7c7900990a06.pdf
Source: https://youtu.be/MMOlaujSFt0