Navneet Buyback

Navneet Education Limited Board of Directors of the Company  on 20/08/2018, to  approve a proposal of buy back of the fully paid up equity shares of the Company Navneet education announces buyback at Rs 160 for an amount of Rs.  75 crore thru tender route. Navneet Education Limited is into children book publishing, scholastic stationery and non-paper stationery products. The stock which had dipped to  Rs. 118-119 levels even after an inline Q1Fy19, had recovered to Rs. 122-123 range after the management indicated its intention for a buyback.  After the Board meeting Navneet Education surged nearly 5% after Board approved Share Buyback at Rs 160 per share slightly higher than market expectations.

Navneet Buyback 2018 : Latest updates:

Navneet Buyback has closed. See subsequent  Table for acceptance ratio
Buy Back Issue date 24/09/18 to 08/10/18
Buyback Shares reserved for Retail : 703,125
No. of Retail share holders on RD:  26,980
Retail Share holding on RD for Buyback:  7209155
Entitlement Ratio 9.75%

Navneet Buyback: Present and Previous Buyback 
Particular / Year
Present Buy Back
Previous Buyback
Buy Back first intimation13-08-1808-11-16
Market Price a day prior to this118.1101.35
Market Price a day after this122.599.5
Buy Back Board Meeting20-08-1811-11-16
Buy Back Type Tender Offer Tender Offer
Buy Back Price160125
Market Price before Board meeting122.8103.25
Market Price a day after Board meeting126.5106
% Premium on Market Price30.29%21.07%
Buy Back Size in Rs. Crore75.0058.21
Buy Back Size ( Shares)4,687,5004,657,000
Equity Capital in crore46.7147.64
Face Value of Share in Rs.22
% Buyback2.01%1.96%
Record Date31-08-1824-11-16
Buy Back Issue date24-09: 08-10-1822-12-16 to 04-01-17
Buyback Shares reserved for Retail 703,125698,550
No. of Retail shrhlders on RD26,98023,340
Retail Shares on RD for Buyback72091557165695
Entitlement Ratio9.75%9.75%
No. of Retail Shrhldrs who tendered5,9342,059
Shares actual, tenderd by retail2,562,4771239642
Tendering ratio35.54%17.30%
Overall Acceptance Ratio27.44%56.35%
Actual Retail Aceeptance**26%*
* from some participants
Navneet Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on shareholding of investors  as on 31/03/2018 in the category 1-500 shares, 500-1000 shares and 1000-2000 shares of Navneet Education Limited as on 31/03/2018. Further we have given some markup for addition to their holding  by existing investors but the bulk of additions are likely to come from new category of arbitrage investors whose shareholding in all likelihood could surpass the existing shareholding of retail investors. Being a small issue the number of new investors who flock in to take advantage of arbitrage could greatly alter the  final acceptance ratio as Navneet Buyback is not a very large one compared to TCS and HCL. In normal circumstances, Navneet Buyback could have a acceptance ratio in 20-40% band. In the  last buyback acceptance ratio was 56.35% but subsequently Navneet  education share slowly climbed up aided by good results and went to Rs. 165 against the buyback price of Rs. 125.  

Cross Tabulation Indicating Estimated Returns(Just Possibilities)

The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Acceptance Ratio and Price Post Buyback. We have depicted the same as a cross tabulation showing Absolute Returns as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.

Shares Purchased
1250
Nos.
Share Buyback Price160
Tabulation of Absolute Returns
A) Based on Share Price at time of Post
Navneet Share Purchase Price taken123Investment153750Rs.
Acceptance Ratio / Price Aft Buyback 106112118124
20%-5.04%-1.14%2.76%6.67%
25%-2.85%0.81%4.47%8.13%
30%-0.65%2.76%6.18%9.59%
35%1.54%4.72%7.89%11.06%
Navneet Buyback of Shares

Companies are increasing resorting to Buyback of their shares at a price higher than market price for  variety of reasons mainly driven by  the desire to return money to shareholders including promoters  in a  Tax efficient way. This post is purely for informative and educational purpose and is in no way suggestive of taking any position in the counter. Profit or Loss in  any buy sell operation in stocks is associated with significant risk of capital loss. For more on Buyback Benefits and other issues please refer the earlier Posts
  TCS Buyback of Shares 2018
  HCL Technologies Buyack 2018 (HCLTECH Buyback)
 Mphasis Buyback of Shares 2018
 

Navneet Education Price Chart and Quarterly Performance:
Navneet Education price chart
Particulars/ Rs. CrJun-18Mar-18Dec-17Sep-17 (Cr)
Gross Sales34261320753090430541
PBIDT10296964691578983
PBDT10279963491518976
Adjusted Profit After Tax7362692565456460
EPS 19.1736.0734.1233.67
Dividend (%)4000700700
Equity383191191191
Face Value 1111
PBIDTM(%)30.0530.0729.6329.41
PBDTM(%)3030.0429.6129.39
PATM(%)21.4921.5921.1821.15
*Bonus 1:1 in  June 2018

Some Observations (To be Updated  with progress of Buyback):
  • Navneet Education Limited Price chart indicates that the lowest price touched by it in last six months is about 110 with 52 week of 108.5. This provides comfort that there has not been a sharp run up in the share. The stock has been under performing the broader market in line with other midcaps. 
  • For Q1-FY2018-19, Navneet Education Limited reported an in-line performance. On a yoy basis, Revenue was up 19%, EBIDTA expanded by  75bps. In the quarter its Stationery revenue exhibited good growth while revenue  from Publishing was impacted by  by delay in textbook release mainly due to delays related to Government decisions. 
  • Being a small Buyback of 75 crores any significant interest by investors with expectation of arbitrage gains can heavily reduce the acceptance ratio.
  • The company’s underlying  business is strong and I may take a long term view  of 1 to 2 years of the remaining shares after buyback. 

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.