Revathi Equipment :- Delisting – Live Case Study

Part 2

We had initiated the position on 7 January 2021 in Revathi Equipment ltd for taking the advantage of upside in the delisting opportunity. It would be easy for one to understand the whole case if one goes through the Part I before diving into Part II.

For the purpose of this part please assume the date today to be (1st March, 2021)

Reason for Review

The results for postal ballot were declared on 1st March, 2021. Hence, a review is needed.

Why Didn’t we wait for Postal Ballot?

As explained in Part 1, The promoter can not delist the company without the approval of the public shareholders. So any company desirous of delisting its equity shares needs to obtain the prior approval of shareholders of the company by special resolution passed through postal ballot.

Initiation Thought: At the time of initiating the position, the chances of getting disapproval by the public shareholders were less as the promoter is very market savvy and won’t mind paying a high discovery price (due to promoter size). And it would be good for the public shareholders too to have an exit at
possibly high price.

Another reason which contributed to favourable odds of postal ballot going through was no significant rise in the share price since past 15 years. Hence, such kind of delisting situations gives an opportunity to public shareholders to exit at higher prices.

15 year price level (Source: screener.in)

With this thought process we had taken the position even without waiting for special resolution.

Results

The postal ballot results have come. Out of total public shareholders only 11.665% casted their votes, and out of that 11.665%, 99.786% cast their votes against the proposal.

Source: Bse corporate announcements

Rule:As per the rule of SEBI, “Special resolution shall only be considered approved only if the votes cast by the public shareholder in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it.”

Exit: As 99.786%, out of total votes casted were against the proposal of delisting due to which the delisting process was halted. We entered for delisting and the delisting has failed. So we think exiting the position at this point is necesssary even if there is a loss as the current price is around Rs. 520 ( Price at initiation was 590)

Source: in.tradingview.com

Conclusion

This is our opinion, however you may have a different viewpoint or understanding. We would love to know why you think so?

While it is easy said in theory, in practice it is tough to psychologically bear losses. However, Case studies like these help us learn and evolve as better investors/traders.

We may have made some mistakes. We would love to know them.

May we all Learn together!

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