Redington (India) Ltd its board meeting on 17/9/18 has approved buyback of up to 1,11,20,000 shares, aggregating to Rs. 139 crore via a tender route at ₹ 125 per equity share. This represents 2.78 % of the paid-up equity capital. The Redington buyback price is at a premium of about 11% to its closing price of ₹111.50 on 17/9/18. The stock reacted negatively as market was expecting a larger issue and a price in region of Rs. 130/-.
Established in 1993, Redington has evolved from one brand, one product category and one market into a US$ 6.6 billion distribution and supply chain solutions provider to over 200 international brands in IT and Mobility spaces, serving 30 emerging markets.
Redington (India) Limited history of Rewarding Shareholders
Redington has a good dividend track report and has consistently declared dividends for the last 5 years.
Dividend: 120% (Rs. 2.4)- Jun 2018 ; 115%- Jul 2017; 100%- Feb 2017 (special), 105%- Jul 2016, 95%- Jul 2015, 45%- Jul 2014
Redington Buyback: A Framework to Estimate Acceptance Ratio:
This framework is based on shareholding of Redington investors who hold up to certain number of shares as on 31/03/2018. To this we have added estimates for
1) Additional purchase of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Redington Shares by new category of arbitrage investors.
Redington stock may go though ups and downs in the three month period due to stock market movement as well the results that company may declare for Q2FY19. and thus this opportunity has considerable risks. Based on approximations indicated above, an estimated tendering ratio of 65% and considering normal circumstances, Redington Buyback could have a acceptance ratio in 25-35% band.
CrossTablualtion Indicating Estimated Returns(Just Possibilities)
The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback. Investors may kept on mind that stock markets are ruling at a high and at this juncture and there are many political and other uncertainties related to international markets. We have depicted estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
|Cross Tabulation of % Absolute Returns|
|A) Based on Share Price at time of Post||106.8||Amount||170880||Rs.|
|Acceptance Ratio / Price Aft Buyback||90||98||104||110|
|A) Based on subsequent Share Price||101||Amount||161600||Rs.|
|Acceptance Ratio / Price Aft Buyback||88||93||98||103|
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Redington Buyback Offer Details
Particular / Year
Present Buy Back
|Buyback Initial Announcement||11-09-18|
|Buy Back Board Meeting date||17-09-18|
|Buy Back Type||Tender Offer|
|Market Price on announcment Day||114|
|Buy Back Price||125|
|% Premium on Market Price||9.65%|
|Buy Back Size in Rs. Crore||139.00|
|Buy Back Size ( Shares)||11,120,000|
|Equity Capital in crore||80.03|
|Face Value of Share in Rs.||2|
|End date of Voting on Buyback Resolution|
|Buy Back Issue date||06-11: 22-11-18|
|Buyback reserved for Retail (Shares)||1,668,000||0|
|No. of retail shr holders on RD||29,156|
|Retail Shareholding on RD||8903539|
|Buyback entitlment Ratio||18.73%|
|Actual Shares Tendered||Yet to Happen|
|% Shares Tendered||Yet to Happen|
|Actual Retail Aceeptance||Yet to Happen|
Redington Price Chart and Quarterly Performance:
|Rs. In Crore|
|Reported Profit After Tax||26.46||32.87||45.69||66.4||38.96||50.94|
- Overseas markets contributed 64% of the overall revenue of the company
during FY 18.
- Harrow Investment – the promoter of the Company formerly known as Redington Mauritius Limited (RML), Mauritius had in 2016 sold 5.13% stake in the company bring their stake down to 8.20%.In Financial Year 2017-18. it further 1.99 crore shares or 4.98% stake in Redington (India),at an average price of Rs125. Among the buyers of the shares are Norges Bank on Account of the Government Pension Fund Global, which bought 1.19 crore shares, and Reliance Mutual Fund, which purchased 70 lakh shares of the firm.
- Due to this company does not have any promoter group and is professionally managed.
- In FY17-18, • CRISIL has upgraded the longterm ratings on the bank facilities of the Company to ‘CRISIL AA /Stable’ from ‘CRISIL AA- / Positive’. The short-term rating and commercial paper have been
reaffirmed at ‘CRISIL A1+’.
Some Observations (To be Updated with progress of Redington Buyback):
- Reginton now does not have any promoters in the strict sense and the company is professionally managed.
- Redington has an investment in Turkey which has been hit hard by sudden devolution of its currency. Redington has already clarified that it may be impacted to 5-6%, if the situation stays at this level.
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.