NLC India LImited Buyback

NLC India’s board has approved a proposal to buy back 14.19cr shares at Rs88/- per share. This buyback offer amounts to Rs1,248cr and is 9.28% of the the paid-up share capital of the company.  The buyback price of Rs. 88 is at an 19% premium to Tuesday’s closing price.  The stock price moved up significantly on this buyback announcement.

Key Updates
  • NLC India Buyback Issue Date from Nov 13, 2018 to Nov 28, 2018.
  • NLC India Entitlment Ratio at ~75% ( See Table)
  • NLC India fixes 24/10/18 as RD for Buyback
NLC India Buyback 2018 and 2017

Particulars
Buyback 2018
Buyback 2017
Announcement of Intent for Buyback03-10-2018
Market price aday before this66.5
Board meeting for Buyback09-10-201831/01/17
Buy Back Type Tender Offer Tender Offer
Buy Back Price8899
Market Price before Board meeting73.9593.65
Market Price a day after Board meeting81.8596.7
% Premium on Market Price19.00%5.71%
Buy Back Size in Rs. Crore1249.001,476
Buy Back Size ( Shares)141,931,818149,141,173
Equity Capital in crore1528.5684271677.7096
Tot Number of shares1,528,568,4271,677,709,600
Face Value of Share in Rs.1010
% Buyback9.29%8.89%
Record Date24-10-1810/02/17
Market Price as on RD for buybackYet to Happen96.85
Market Price on issue Closing DateYet to Happen107.35
Buy Back Issue date13-11: 28-11-186/03: 30/03/17
Indicative Mrkt Pr aft return of Shares106
Buyback Shares reserved for Retail 21,289,77316,585,456
No. of Retail Shares on RD Buyback28,240,28716,585,456
Buyback Entitlement75.39%100%
No. retail Shareholders who bidYet to Happen
Shares Tendered by retailYet to Happen1,405,304
Tendering ratioYet to Happen
Retail responseYet to Happen8.47%
Actual Retail AceeptanceYet to Happen100%
NLC India Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on shareholding of NLC India investors who hold up to 2000 number of shares as on 31/03/2018. To this we have added estimates for 
1) Few additional purchase  of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Shares by arbitrage investors.
3) Inputs from Retail holding on RD in Buyback -2017
Based on approximations indicated above, and taking a considerably high tendering ratio, NLC India Buyback could have a acceptance ratio in 80-90% band under normal circumstances & can even touch 100% acceptance levels.

Cross Tabulation of Estimated Returns for NLC India Buyback

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 in mind that stock markets are quite volatile 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.

Shares Purchased
2000
Nos.
Share Buyback Price88
Tabulation of Absolute Returns
A) Based on Share Price at time of Post
Share Purchase Price taken81.4Investment162800Rs.
Acceptance Ratio / Price Aft Buyback 60657075
75%-0.49%1.04%2.58%4.12%
80%1.23%2.46%3.69%4.91%
85%2.95%3.87%4.79%5.71%
90%4.67%5.28%5.90%6.51%
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 Buyback 2018
About NLC India Limited (Neyveli Lignite Corporation) :
  • Neyveli Lignite Corporation (NLC), incorporated in 1956 is a Schedule “A” Central Public Sector Enterprise, under the administrative control of the Ministry of Coal and has been conferred with “Navratna” status by the Government of India in April 2011.
  • The Company is in the Business of Lignite Mining and Power generation. The mining capacity of the Company is 30.6 MTPA out of which 3 Mines are located at Neyveli, Tamilnadu having capacity of 28.5 MTPA and one Mine having capacity of 2.1 MTPA is located at Barsingsar, Rajasthan.
  • It is operating four Thermal Power Stations at Neyveli, TamilNadu and one Thermal Power Station at Barsingsar, Rajasthan with a total installed thermal capacity of 3240 MW. Company has set its footprint in generation of renewable energy through its Wind Power Plant (51 MW) at Kazhuneerkulam, Tirunelveli in the State of Tamilnadu and Solar Power Plant (10 MW) at Neyveli.
  • Company has also commissioned a coal based thermal Power station of 1000 MW (2 x 500 MW) at Tuticorin, Tamilnadu which has been implemented through its JV company NLC Tamilnadu Power Limited (NTPL) with TANGEDCO having 89% stake in the company.
  • Coal India Limited (CIL) and  Neyveli Lignite Corporation India Limited (NLCIL) have signed a Memorandum of Understanding (MoU) to form a joint venture (JV) company for solar power generation of 3,000 MW as well as thermal power projects totaling 2,000 MW.
Assessment: 
  • The size of  NLC India Buyback is good which gives hope to good percentage acceptance of shares for retail.
  • Retail Holding in the company is small and in 2017 buyback, the retail investors were about 11% of the portion reserved for them in buyback.
  • In NLC India 2017 buyback, entitlement ratio was 100% as the price announced by company at that time was not high and stock moved up. Hence it is not comparable.
  • Barring large scale buying by arbitrage investors, Buyback % for retail should be high.
  • on eve of NLC India buyback , the stock has moved up 10-15% already and hence only  moderate returns if any are left on the table.
  • I expect NLC India Buyback to proceed at a good speed. 

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.