Adani Powers (APL) board of directors have approved the proposal to delist Adani Power from exchanges. It announced its decision in an exchange notification on Monday. In buying back its shares, Adani Power is offering a floor price of Rs 33.8 to its existing shareholders – a price that is 11 percent lower than its current market value.
“The delisting proposal is in the interest of the shareholders,” the company mentioned in its proposal to the bourses.
Company delisting is a process in which publicly listed companies remove themselves from the stock exchange and buy back shares from existing shareholders. It can be voluntary or involuntary. Recently, in May, Vedanta Limited, parent company of Hindustan Zinc Ltd. also announced delisting decision.
Gautam Adani led Adani Group expressed its desire to delist in the context of improving company’s operational, financial, and strategic efficiency. It highlighted that the decision to delist would give them the freedom to move ahead with their corporate and financial restructuring and acquisition proposals with alacrity.
The board of the company fixed a floor price of Adani Power shares at Rs 33.8, which has disappointed its shareholders. It is 11 percent less than its current market value. After the announcement, Adani shares lost several points, but before day end, it recovered some traction to close at Rs 37.80, which is still 0.53 percent less than its value in BSE. In clarifying over the floor price, the company said it followed the directives of SEBI Regulation 15(2) of Delisting Regulations.
Some background on Adani Powers
Adani Power Ltd. is one of the major private sector power generation and distribution companies with a headquarter in Ahmedabad. It has plants in six Indian states with a total production capacity of 12,410 megawatts. As per the company’s website, it is India’s largest private energy producer with a turnover of Rs 55.2 billion in FY19.
In the past six months value of Adani Power shares diminished significantly from `Rs 73.75, which has made delisting an attractive proposal for the promoter’s group.
The promoter group currently has 74.9 percent of the company’s share in their possession. The remaining 25.03 percent is public ownership, which mainly consists of foreign portfolio investors and overseas corporate.
Adani power delisting price is approved by the board of directors which they said is per SEBI Delisting regulation. On June 22, M/s Dharmesh Parikh & Co, Chartered Accountants, issued APL share certificates in favour of Rs 33.82.
APL has appointed Vivro Financial Services; a SEBI enlisted Category-I merchant banker to carry out the due diligence process associated with delisting.
The floor price is the minimum price of share decided by the company. The declared floor price of Adani Power has disappointed its shareholders as they would incur a loss from the deal. As a result, share prices of the company fell sharply in exchanges.