Bajaj Auto sets record date for Rs 4,000-crore buyback plan; should you invest for 20% gain?
Bajaj Auto has set February 29 as record date for its second share buyback in two years.
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Bajaj Auto has announced February 29 as the record date for a proposed buyback plan amounting to Rs 4,000 crore, at Rs 10,000 per share. The upcoming buyback will be executed via the tender route.
This will be Bajaj Auto's second share buyback in two years. With more than a week before the much-anticipated stock buyback hits the Street, can investors use this opportunity to gain from the corporate action?
At Friday's closing price, the buyback price implies a premium of 20.1 per cent in Bajaj Auto shares.
According to domestic brokerage KR Choksey, the buyback announced by Bajaj Auto is in line with its latest dividend distribution policy (introduced in 2023).
Bajaj Auto's floated its last buyback in 2022. The share buyback, worth Rs 2,500 crore, was priced at Rs 4,600 per share.
For the unversed, here are some of the key details about the upcoming Bajaj Auto buyback:
- No. of shares to be bought back: 40,00,000
- Buyback price: Rs 10,000 per share
- Buyback size: Rs 4,000 crore
- Small shareholders category: 15 per cent of the buyback offer i.e. 6,00,000 shares
- Outstanding shares as of January 4, 2024: 28,31,79,756
- CMP (Feb 16): Rs 8,300
- Assumed participation ratio: 100 per cent
According to domestic brokerage SBI Securities, in case the acceptance ratio in the stock goes to 45-55 per cent, there will be sharp movement to the tune of 9-13 per cent.
|
Acceptance Ratio
|
No. of Shares bought*
|
Investment Value @ CMP
|
Buyback Shares
|
Buyback Value @ Rs 10,000 per share
|
Remaining shares
|
Value of Remaining shares @ CMP
|
Total Value if Tendered (Rs)
|
Buyback Profit (Rs)
|
Total Return on Investment (%)
|
|
(Rs)
|
|||||||||
|
(Rs)
|
(Rs)
|
||||||||
|
25%
|
20
|
1,66,000
|
5
|
50,000
|
15
|
1,24,500
|
1,74,500
|
8,500
|
5.1
|
|
35%
|
20
|
1,66,000
|
7
|
70,000
|
13
|
1,07,900
|
1,77,900
|
11,900
|
7.2
|
|
45%
|
20
|
1,66,000
|
9
|
90,000
|
11
|
91,300
|
1,81,300
|
15,300
|
9.2
|
|
55%
|
20
|
1,66,000
|
11
|
1,10,000
|
9
|
74,700
|
1,84,700
|
18,700
|
11.3
|
|
65%
|
20
|
1,66,000
|
13
|
1,30,000
|
7
|
58,100
|
1,88,100
|
22,100
|
13.3
|
|
75%
|
20
|
1,66,000
|
15
|
1,50,000
|
5
|
41,500
|
1,91,500
|
25,500
|
15.4
|
|
85%
|
20
|
1,66,000
|
17
|
1,70,000
|
3
|
24,900
|
1,94,900
|
28,900
|
17.4
|
Source: SBI Securities
Should you participate in the Bajaj Auto buyback?
Independent market analyst Ambareesh Baliga told Zeebiz.com that investors need not engage in the buyback without a clear a long-term view.
In the buyback, 2.5 per cent of the holding will be bought back with a better acceptance ratio this time.
"The stock has appreciated well in the past few months, so the gap has reduced between the buyback and the market price," Baliga added.
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