Sesa Goa, Sterlite Industries shares tank on merger plan

Shares of Sesa Goa and Sterlite Industries tumbled up to 9 per cent on Monday, after the announcement of a merger of the two companies by parent Vedanta group.

Shares of Sesa Goa plunged 8.9 per cent to touch a low of Rs 207.10 on the BSE. Similarly, Sterlite shares went down by 4 per cent to Rs 113.90 in morning trade.

"Fall in the stocks is because of the swap ratio adjustment. Here, the fall is steep for Sesa Goa because it is adjusting to the new share swap ratio," Ashika Stock Brokers Research Head Paras Bothra said.

Shareholders of Sterlite will get three shares of Sesa Goa for every five shares held, according to the swap ratio fixed.

Eventually, they will become shareholders of Sesa Sterlite to be listed on bourses, after receiving regulatory approvals, including that of shareholders of the concerned companies.

"Prima facie, this merger ratio appears to be slightly in favour of Sterlite shareholders. And it appears that the merger ratio is slightly detrimental to Sesa Goa shareholders," Jagannadham Thunuguntla Strategist & Head of Research SMC Global said.

Meanwhile, shares of other Vedanta Group firms - Hindustan Zinc and Cairn India showed mixed trend during the morning trading session.

In a major revamp, metal and mining major Vedanta Resources on last Saturday decided to merge Sterlite Industries with Sesa Goa to create a $20 billion controlling entity for simplifying its group structure.

Merger of Sterlite Industries and Sesa Goa will lead to a new entity, Sesa Sterlite, which will be the seventh-largest natural resources company in the world.