Why is Vedanta rangebound?

Promoter of Vedanta Ltd raised voluntary open offer price to Rs. 235 from Rs.160 earlier, as also, increased size of the open offer to 65.10 crore shares (17.51% of equity) from 37.18 crore shares (being 10%) earlier. If this data point is positive, why has the share fell from Rs.230 to Rs.223, and now trading in a rnage of 2-3 rupees, for the past 4 days?

One section of the market believes that share price will be ‘kept supressed’ till the close of the open offer, to encourage higher participation in the tender offer. The open offer will begin today and end on 7th April.

Promoter is very keen to increase stake in Vedanta, which is the group’s umbrellas entity for all natural resource assets in India. Having already bid for 3 PSUs assets, Concor, BPCL, Shipping Corp, and keen on other marquee ones like residual stake in Hindustan Zinc, consolidating holding is vital before these acquisitions materialise.

Promoter has already increased shareholding in Vedanta Ltd from 50.14% to 55.11%, through Rs. 2,960 cr block deal in Dec 2020, and is keen to increase it further to 72.62%, via the open offer, for which, size has been raised by 157% to Rs. 15,300 crore from Rs. 5,950 crore earlier. All efforts are now being channelized to make the open offer a success, after a failed delisting attempt in Oct 2020.

Thus, next 3 weeks look action packed for Vedanta, till the open offer closes on 7th April, after which share price may blast, on lower float and improved Q4 earnings.

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