Markets continued their volatile way and lost on four of the five trading sessions last week. BSESENSEX lost 544.97 points or 1.72% to close at 31,097.73 points while NIFTY lost 114.65 points or 1.24% to close at 9,136.85 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.99%, 0.75% and 0.68% respectively. BSEMIDCAP gained 0.68% while BSESMALLCAP gained 0.47%.
Dow Jones was choppy as well and lost 645.90 points or 2.65% to close at 23,685.42 points. The Indian Rupee lost 2 paisa or 0.03% to close at Rs 75.56.
In terms of announcements there were multiple announcements made during the week. Markets in its typical fashion sold off on the announcements as most of them were for the medium term. There is a saying that buy the rumour and sell the fact. This is exactly what markets did and completely ignored that the announcement was for 10% of the country’s GDP amounting to 20 lakh crs. In far reaching consequences, the coal sector, defence sector is amongst key areas which have been opened up. One can be sure that FDI will flow sooner than later and the impact of these consequences would be visible in a couple of quarters from now.
Anil Agarwal the promoter of Vedanta has made an offer to buy out the minority shareholders of his listed entity Vedanta at Rs 87.50 which is at a steep discount of the book value of the company. The book value is about Rs 210 and this works out to a more than 50% discount or less than half the book value. The 52-week high/low of the share is Rs 179.95/60.30. This move by Anil Agarwal can be termed as opportunist and is nothing short of looting the minority shareholders of the company. In depressed conditions post covid-19 Anil Agarwal wants to make a killing of minority shareholders who hold 48.94% of his company. One wonders when SEBI wants the government to look at investments from China into Indian companies, whether they (SEBI) should also look at such promoters who want to take opportunistic advantage of shareholders in tough conditions. Further one is surprised to note that not one independent Director has the courage to stand up and voice dissent on the move which is to kill minority shareholders. If nothing else the price which was offered should have been substantially higher at book value.
Very few readers would remember that this very Anil Agarwal and his company Sterlite Industries has the dubious distinction of being the first if not only company which extinguished the shares of minority shareholders some 25-30 years ago if they did not say no. It was then that SEBI introduced the concept of only positive voting. He merges, demerges companies at will and whenever he feels he benefits. Vedanta was formed after merging Cairn India into Sterlite and saying all-natural resources companies would be housed under one umbrella.
At the board meeting to consider the delisting offer, one expects independent directors to stand up for the rights of minority shareholders and demand a price equal to book value or make an admission that the book value of the company stated is incorrect.
The mother of all rights issue from Reliance Industries would be opening from Wednesday the 20th of May and closing on Wednesday the 3rd of June. While the issue price is at Rs 1,257, only 25% or Rs 314.25 would be payable on application. The rights issue would be in the ratio of one share for every 15 shares held. While SEBI and the government have gone all out to help in the fast tracking of this issue to overcome the tough conditions prevalent under covid-19, it can be said that the management of the company as advised by their battery of merchant bankers and registrar have decided to ride rough shod over the minority shareholders of this company. As per data from the annual report of 2018-19, the number of shareholders who hold between 1-500 shares is 19.99 lac shareholders with an average holding of 94 shares and form the largest block of the 25-lac odd minority shareholder base of the company or 80% of the shareholders. The way to exercise the right is detrimental to their cause.
The company would effectively be not sending physical forms considering the current conditions. Even if they do send, they would in all probability reach after the issue is over and they have mentioned that neither the company or the registrar or the merchant bankers would be responsible for not receiving the form. In today’s era one can apply for an IPO online without downloading and filling any form and most importantly without signing the application form. Why therefore in a rights issue where my entitlement comes or originates from being a shareholder and all details about me are already available why do I need to sign a form? These shareholders are not expected to be people who have the luxury of having a printer at their home and in these conditions of lock-down having the public facility where I go and get a five-page document printed is unthinkable.
What this would ensure is that almost 80% of the number of shareholders or about 20 lacs would not be able to exercise their average right of six shares(94 shares average holding) and the company would have a spill over of roughly 1.2 cr shares, which is loose change in such a mega issue. What is significant however is the fact that the number of applications to be handled would get reduced to just about 5 lacs. Not sure whether this is the intention of the ministry or SEBI or the company. Hope someone answers.
Coming to covid-19, the number of patients worldwide has increased to 48.04 lacs with 3.16 lac deaths and 18.58 lac patients recovering. In India the number of patients has shot up to 96,100 with 3,029 deaths and 36,824 patients recovering. Compared to a week ago, the number of patients globally has increased by 6.24 lac patients while those who have died has gone up by 32,400. Patients recovered has gone up by 3.20 lacs. In India, the new patients have increased by just under 30,000 cases while deaths have increased by 800. Number of patients recovered has gone up by 15,800. In both cases the number of patients recovered compared to new cases is more than half which is encouraging. We have reached a stage in India, where the number of cases of new patients would rise rapidly, but we need to ensure that treatment to them is readily available.
Markets are likely to be under pressure with no more announcements likely. The strategy to be adopted should be to sell on rallies and use sharp dips to buy. There should be no urge to invest if markets remain lacklustre. In a negative biased market, it makes sense to be patient.
