National Aluminium Company (NALCO) on 9/10/2018 had informed the stock Exchanges that the meeting of the Board of Directors of the Company is scheduled on 12/10/2018, to consider and approve the proposal for Buyback of the fully paid-up equity shares of the Company. Subsequently the BOD approved the proposal for buyback from all the equity shareholders of the Company, as on the record date, on a proportionate basis through a “Tender Offer” route. Nalco Buyback envisages buyback of equity shares not exceeding 67,311,386 of Rs. 5/- each of the Company, representing 3.48% of the total number of equity shares in the paid-up share capital, at a price of Rs. 75/-. The Nalco buyback aggregate consideration amounts to Rs. 5,048,353,950/- ( ~ 504.83 crore).
- NALCO Buyback Issue Date from Nov 13, 2018 to Nov 28, 2018.
- Download Nalco Letter of Offer
- NALCO Buyback entitlement is ~15% (see Table)
- NALCO fixes 26/10/18 as RD for Buyback
NALCO Buyback 2018 and 2017
|Announcement of Intent for Buyback||09-10-2018|
|Market price a day before this||61.5|
|Market price a day after this||66.5|
|Board meeting for Buyback||12/10/2018||25/05/16|
|Buy Back Type||Tender Offer||Tender Offer|
|Buy Back Price||75||44|
|Market Price before Board meeting||67||42.35|
|Market Price a day after Board meeting||67||41.85|
|% Premium on Market Price||11.94%||3.90%|
|Buy Back Size in Rs. Crore||504.84||2,835|
|Buy Back Size ( Shares)||67,311,386||644,309,628|
|Equity Capital in crore||966.46||1288.62|
|Tot Number of shares||1,932,928,884||2,577,238,512|
|Face Value of Share in Rs.||5||5|
|% Buyback of Total Share Capital||3.48%||25.00%|
|Govt Shareholding in the company||56.17%|
|Indiv. Shareholding in the company||5.03%|
|Market Price as on RD for buyback||Yet to Happen||46.6|
|Market Price on issue Closing Date||Yet to Happen|
|Buy Back Issue date||13-11: 28-11-18||30/08/16 to 14/09/16|
|Indicative Mrkt Pr aft return of Shares|
|Buyback Shares reserved for Retail||10,096,708||33,246,765|
|No. of Retail Shares on RD Buyback||66,233,559||33,246,765|
|No. retail Shareholders who bid||Yet to Happen|
|Shares Tendered by retail||Yet to Happen||9,136|
|Tendering ratio||Yet to Happen|
|Retail response||Yet to Happen||0.03%|
|Actual Retail Aceeptance||Yet to Happen||100%|
NALCO Buyback: A Framework to Estimate Acceptance Ratio:
This framework is based on estimation of shareholding of Nalco investors who hold around 2500 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 NALCO Buyback 2016
Based on approximations indicated above, and taking a considerably high tendering ratio, NALCO Buyback could have a acceptance ratio in 30-45% band under normal circumstances. Any increase in Nalco share price in intervening period will result in increase of this ratio and the % tendering will go down and vice versa if Nalco price drifts lower.
Cross Tabulation of Estimated Returns for NALCO 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.
|Share Buyback Price||75|
|Tabulation of Absolute Returns|
|A) Based on Share Price at time of Post|
|Share Purchase Price taken||66.5||Investment||166250||Rs.|
|Acceptance Ratio / Price Aft Buyback||58||62||65||68|
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- National Aluminium Company Limited (NALCO) is a Navratna CPSE under Ministry of Mines, Govt. of India.
- NALCO is lowest cost producer of Alumina globally, supported by captive bauxite mines at Panchpatmali in Odissa
- The Company is having integrated and diversified operations in mining, metal and power.
- NALCO is one of the largest integrated Bauxite-Alumina-Aluminium- Power Complex in the Country. The Company has a 68.25 lakh TPA Bauxite Mine & 21.00 lakh TPA (normative capacity) Alumina Refinery located at Damanjodi in Koraput district of Odisha, and 4.60 lakh TPA Aluminium Smelter & 1200MW Captive Power Plant located at Angul, Odisha.
- NALCO has bulk shipment facilities at Vizag port for export of Alumina /Aluminium and import of caustic soda and also utilizes the facilities at Kolkata and Paradeep Ports.
- Nalco reported sales turnover of Rs 9,376 crore in financial year 2017-18.
- Presently, Government of India holds 56.59% equity of NALCO.
- During the year, NALCO was the third highest net Foreign Exchange Earning CPSE in the Country. The Net sales turnover for the year is Rs. 9,377 crore (highest ever since inception) registering a growth of 26 % over last year.
- Export earning of Rs. 4,076 crore of Nalco was highest ever since inception registering a growth of 12 % over last year.
NALCO Price History:
Assessment: NALCO Buyback
- Nalco Buyback size was constrained by existing 56.17% equity of Govt which cannot not go below 51%. The buyback size of Rs. 504 cr. is bit lower than market expectations and hence stock may not react very positively to the announcement, though the buyback price of Rs. 75 is more or less OK. However Nalco is expected to report good Q2FY19 results, after decent Q1FY19 numbers, which may lend support to the share price.
- Nalco Buyback is not likely to have high acceptance levels when compared with expectations in NLC india Buyback which is a much larger buyback.
- In NALCO Buyback 2016, 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 in the range indicated. As issue is not large it may not attract many arbitrage investors.
- on eve of NALCO Buyback , the stock has moved up 10% already and hence only moderate returns should be expected.
- Nalco is a cash rich company and it can be judged from the fact that it paid a dividend of Rs. 1102 crore in Fy 17-18.
- I expect Nalco Buyback to proceed at a good speed & expect its results to support the share.
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.