Delisting spree: Investors in India betting on which companies will be next

A wave of voluntary delisting proposals in the country's $1.8-trillion stock market is stoking bets on which entity will be the next to go private.

In the last two months, the majority owners of Vedanta, Adani Power, and Hexaware Technologies have proposed buying out all publicly traded shares amid the coronavirus-induced sell-off in stocks. With speculation rife that other firms will follow, CNBC-TV18 last month reported that Diageo is exploring options to delist United Spirits, while some traders are betting that US-based Oracle can privatise its Indian unit.

Enthusiasm to invest in shares of public companies that can go private matches a trend seen in Singapore in recent years. The premium for privatisations and takeovers in the city-state averaged about 15 per cent between 2017 and July 2019, according to the data from DBS Bank. The strategy was earlier seen in India after the global financial crisis, and, in 2009, at least one local fund manager opened a fund to buy shares in companies seen to have a high likelihood of delisting.

 

“I have some stocks that are bets on delisting due to their cash-rich foreign parents,” said Chokkalingam G, head of investment advisory at Equinomics Research & Advisory, adding, “A fall in stock valuations and the rupee is underpinning investments in the likely delisting candidates.”

Billionaire Anil Agarwal’s Vedanta Resources last month was the first to propose delisting of its India listed Vedanta. Its shares had collapsed about 40 per cent between January 1 through May 12 — the day before  Adani Power lost 39 per cent of its market value so far in 2020.