Vedanta group entity trims promoter stake silently

Vedanta Netherlands Investments BV, the promoter group entity, cut its stake in Vedanta Ltd to 0.13% as of 31 March from 1.71% as of December-end, resulting in a decline in promoter group stake to 68.11% from 69.69% at the end of the December quarter. The promoter group’s shares that changed hands would be worth ₹1,614 crore at current prices.

A Vedanta group spokesperson did not respond to an email seeking comments.

Securities and Exchange Board of India (Sebi) rules require promoter group entities to disclose any stake purchase or sale.

Under Vedanta’s insider trading policy, any sale or purchase of shares by the promoter group or so-called designated persons exceeding ₹10 lakh must be reported to the company within two trading days.“The company shall notify the Stock Exchanges of the particulars of Form C received within two trading days after receiving disclosure or becoming aware of the transaction,” the trading policy states.

All publicly traded companies are required to set their insider trading policies in accordance with Sebi’s regulations.

Vedanta’s promoters took out a $100 million loan from Standard Chartered Bank in September 2022 and pledged their shares as collateral. The loan was secured by a total of three promoter group entities, including Vedanta Netherlands Investments. In March, Vedanta repaid the loan and revoked the pledge on the shares.

Vedanta Investments Netherlands owned a 1.7% stake as of 14 March, about the same as at the end of the December quarter. However, on 31 March, the entity’s stake fell to 0.13%, suggesting that the transaction was likely done in the second half of March.

The buyer of the shares and the method of the sale could not be ascertained.

However, in a note to its clients, Japanese broker Nomura observed that Vedanta group may have sold 1.6% of its stake in the company in the open market for around $200 million. In the report, Nomura observed that the holding companies of Vedanta Resources Ltd (VRL) paid all the debt maturing in April and as a result, reduced the Holdco entities’ debt by nearly $1 billion. “We believe the funding sources for the aforementioned VRL debt repayments came from dividends received of ~$600 million (after withholding tax), brand fees of ~$300 million and ~1.6% Vedanta Ltd stake sale around end-March in the open market for ~$200 million,” the note said.

Securities market lawyers said any reduction in promoter shareholding must be carried out in accordance with Sebi rules. “There are two or three different laws which mandate such disclosure, including the takeover code, listing obligations and disclosure requirements and the Insider Trading rules,” a securities market lawyer said, requesting not to be named. “If the lapse was inadvertent, the company can still disclose the information now and seek to settle the matter with Sebi through a consent mechanism.”