JB Chemicals & Pharmaceuticals Ltd  informed on 23/08/18 that a meeting of the Board of Directors of the Company is scheduled on August 31, 2018 at which the Board will consider the proposal for Buy-back of fully paid-up Equity Shares by the Company. JB Chemicals buyback has been approved by Board of Directors on 31/08/18 for an amount of Rs. 130 crores at a buy back price of  Rs. 390 through the tender route. This is at  15.2% premium to yesterdays closing price of Rs. 338.5 and  the buyback of 33.33.333 shares represents 3.99% of the share capital. J.B.Chemicals & Pharmaceuticals Ltd.(JBCPL) is an Indian pharmaceutical  company catering to domestic and International markets. JBCPL is also known as Unique Pharmaceutical Laboratories which is a division of JBCPL.  JBCPL exports to over 30 countries across the world and earns more than half its revenue from exports. The Company is ranked 37th in the domestic Industry with Company’s four brands viz., Rantac (anti-peptic ulcerant), Metrogyl (amoebicides), Cilacar (calcium channel blocker) and Nicardia (calcium channel blocker) featuring in top 200 brands.  Just after the announcement of its intention to go for buyback,  the stock traded higher hitting a high of Rs. 338 and closing the day with about 7% gain at  Rs 325.5 on the NSE with about 10x volumes

Latest Updates
  • JB Chemicals Buyback  issue to open from  10/10/18 to 24/10/18. See table for entitlement ratio.   
  • RD for JB Chemicals buyback is 12/09/18.
  • 31/8/18: Board approved Buyback for 130 crores at max. price of Rs. 130/- through Tender Route
  • 31/08/18  Record date to determine entitlement  to participate in the proposed offer is 12 Sept
JB Chemicals Buyback 2018 and 2017
Particular / Year
Present Buy Back
Previous Buyback
Buy Back Board Meeting31-08-1825-05-17
Buy Back Type Tender Offer Tender Offer
Buy Back Price390400
Market Price before Board meeting338.3103.25
Market Price a day after Board meeting340106
% Premium on Market Price15.28%287.41%
Buy Back Size in Rs. Crore130.0050.00
Buy Back Size ( Shares)3,333,3331,250,000
Equity Capital in crore16.7116.964
Number of shares83,550,00084,820,000
Face Value of Share in Rs.22
% Buyback3.99%1.47%
Record Date12-09-1802-06-17
Market Price as on RD for buyback342.4
Buy Back Issue date10-10: 24-10-1803-07 to 14-07-17
Buyback Shares reserved for Retail 500,000187,500
No. of Retail investors on RD for Buyback29,24828,710
No. of Retail Shares on RD for Buyback4,238,9654872664
Buyback Entitlement11.80%3.85%
retail Shareholders who bid71873773
Shares Tendered by retail1290211898015
Tendering Ratio30.44%18.43%
Overall Retail Aceeptance**38.75%20.88%
Actual Retail Acceptance40.12%
JB Chemicals Buyback 2018

The Board meeting on 31/08/18 approved:
1. Tender Route for Buyback of 130 crores i.e. 33,33,3333 shares
2.  Fixed  Rs. 390 as buyback Price
3. Amounts to 3.99% of Share capital
4.  Buyback Price is at 15.2% premium to yesterday’s price of Rs. 338.5

For a understanding of complete BuyBack Process & Terms, please see the link Buyback of Shares: A Primer for Retail Investors

JB Chemicals Buyback: A Framework to Estimate Acceptance Ratio:

This framework has been explained in earlier posts on Buybacks. 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 JB Chemicals Buyback is not a very large one compared to IT Companies. In normal circumstances, JB Chemicals Buyback could have a acceptance ratio in 15-30% band. In the  last buyback acceptance ratio was 20% but size of issue was small at 50 crores.

CrossTablualtion 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. JB chemcials has also run up  in the days ahead of Board meeting by as much as 10% and hence expectation about Returns/Losses should take this into account. We have depicted the estimated Returns  as a cross tabulation showing Absolute Returns as a function of various possible combinations of Acceptance Ratios and Price Post Buyback. These are estimates only.

Shares Purchased
500
Nos.
Share Buyback Price400
Tabulation of Absolute Returns
A) Based on Share Price when Posted
JB Chem Share Purchase Price taken338.3Investment169150Rs.
Acceptance Ratio / Price Aft Buyback 290300310320
20%-7.77%-5.41%-3.04%-0.68%
30%-4.52%-2.45%-0.38%1.68%
40%-1.27%0.50%2.28%4.05%
B) Based on Actual acceptance
Acceptance Ratio / Price Aft Buyback 310
40%2.31%

JB Chemicals Price Chart and Quarterly Performance:

JB Chemicals Pharmaceuticals BuyBack

Particulars

Jun-18Mar-18Dec-17Sep-17Jun-17
Net Sales365.97318.84304.74349.93283.84
Total Income367.09329.94310.06356.89293.11
Total Expenditure291.87279.14246.13273.55252.77
PBIDT75.2250.7963.9383.3440.34
Interest1.270.950.611.060.79
PBDT73.9549.8463.3282.2839.55
Depreciation14.4713.0414.2514.3314.33
Tax17.4114.7415.2216.224.85
Profit After Tax42.0722.0633.8551.7220.37
Extra-ordinary Items00000
EPS5.032.634.036.112.32
Equity16.9616.7116.9616.9616.96
Face Value22222
PBIDTM(%)20.5515.9320.9823.8214.21
PBDTM(%)20.2115.6320.7823.5113.93
PATM(%)11.56.9211.1114.787.18

Some Observations (To be Updated  with progress of Buyback):
  • JB Chemicals Buyback has this time come with a higher issue size. 130 crore compared to 50 crore last year.
  • Still JB Chemicals remain a small size issue  and acceptance ratio last year was 20% which may hover the same mark due to increased awareness among investors and recent significant interest by investors with expectation of arbitrage gains in some similar opportunities. 
  • JB Chemicals recently got clearance for one of its manufacturing unit from FDA which is likely to support company price post JB Chemicals 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.