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. 

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

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.

Catch the latest stock market updates here. For all other news related to business, politics, tech and auto, visit Zeebiz.com.