Vedanta cheers with float boost

By JIM ARMITAGE
Updated:

 

THE London market won a much-needed fillip today as Indian mining group Vedanta raised the number of shares issued in its London float by nearly a fifth amid strong demand.

But the shares got off to a weak start despite being priced slightly lower than the mid-point in the range indicated during the marketing process. Priced at 390p, they fell8 1/2p to 381 1/2p in today's conditional dealings.

Vedanta issued 130m shares, 20m more than planned, to raise £507m, valuing the firm at £1.1bn. The initial 110m share offer was four times oversubscribed.

Despite today's unimpressive debut, the success of JP Morgan and HSBC in getting the float away will ease nerves about investors' confidence after the decision on Wednesday to pull the £330m share offering in Swedish refrigeration group Dometic.

However, analysts remain cautious about whether investors should jump into flotations. Jeremy Batstone at Fyshe Securities warned: 'Investors need to be very careful as to whether these floats have long-term potential for shareholders or are simply done for the business's sake and for the directors to cash in some of their chips.'

Julian Chillingworth, a fund manager at Rathbones, said his firm had subscribed to the offer because of the strong economic prospects for India.

But Tim Rees at Insight Investment said he had declined the invitation, feeling the offer was too pricey, despite an impressive management team.

Only seven flotations valued at more than e100m (£70m) have been done in Europe in the past year, all but two of them in London.

The biggest, at £2bn, was directories group Yell. Vedanta's is the third largest float in Europe, after Yell and Bank Austria, and the first London listing of an Indian company.

The float springs from the sale by founder Anil Agarwal of almost 50% of the company. Brian Gilbertson, former head of BHP Billiton, was given 1% as a golden hello as non-executive chairman. He will sell part of it and will be left with shares worth £3.2m at the start of trading, which begins unconditionally on Wednesday.

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