Cochin Shipyard Buyback

Cochin Shipyard Board of Directors at their meeting held on 16/10/18 approved the proposal for buyback of equity shares of the Company. on a proportionate basis through the tender offer. Cochin Shipyard Buyback comprises  proposal for purchase by the Company of its own Equity Shares not exceeding 43,95,610  equity shares representing 3.23% of the total outstanding number of equity shares in the paid-up share capital of the Company) at a price of Rs. 455/-  per equity share which amounts to  Rs. 200,00,02,550 /- (Rupees Two Hundred Crore Two Thousand Five Hundred and Fifty. only) . Record date for Cochin Shipyard Buyback has been fixed at 31, 2018. Cochin Shipyard Limited (CSL), a Schedule B Miniratna PSU under the Ministry of Shipping. 

Cochin Shipyard Buyback: Latest Updates:
  • Entitlement Ratio 7.29%
Cochin Shipyard Buyback 2018
Particulars
Buyback 2018
Announcement of Intent for Buyback11-10-2018
Market price a day before this370
Board meeting for Buyback16-10-18
Buy Back Type Tender Offer
Buy Back Price455
Market Price before Board meeting400
Market Price a day after Board meeting
% Premium on Market Price13.75%
Buy Back Size in Rs. Crore200.00
Buy Back Size ( Shares)4,395,610
Equity Capital in crore136
Tot Number of shares135,936,000
Face Value of Share in Rs.10
Govt Holding in the company 75%
Indiviual Holding in the ciompany8.32%
% Buyback3.23%
Record Date31-10-18
Market Price as on RD for buybackYet to Happen
Market Price on issue Closing DateYet to Happen
Buy Back Issue date28-11: 11-12-18
MP aft Buyback
Shares for Retail 659,342
No. of Retail Shares on RD Buyback9039214
Buyback Entitlement7.29%
No. retail Shareholders who bidYet to Happen
Shares Tendered by retailYet to Happen
Tendering ratioYet to Happen
Retail responseYet to Happen
Actual Retail AceeptanceYet to Happen
Cochin Shipyard Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on shareholding of Cochin Shipyard investors who hold up to 500 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.

Based on approximations indicated above, and taking a considerably high tendering ratio, Cochin Shipyard could have a acceptance ratio in 10-20% band under normal circumstances

Cross Tabulation of Estimated Returns for Cochin Shipyard 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
440
Nos.
Share Buyback Price455
Abs Returns
MP when Posted399
Investment (Rs.)175560
MP aft Buybk
Acceptance %365375385
10%-6.27%-4.01%-1.75%
15%-5.14%-3.01%-0.88%
20%-4.01%-2.01%0.00%
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
  National Aluminium Buyback 2018 (NALCO Buyback)
 NLC India Buyback 2018
 Buyback of Shares: A Primer for Retail Investors
About Cochin Shipyard Limited :
  • Cochin Shipyard Ltd. (CSL) incorporated in 1972 is a fully-owned Government of India company. In the last four decades, the company has emerged as a forerunner in the Indian shipbuilding & ship repair industry.
  • Cochin Shipyard Limited is the Largest Public Sector Shipyard in India in terms of Dock Capacity.
  • Cochin Shipyard Ltd. undertakes shipbuilding and ship repairs for aircraft carriers and other ships. It is building India’s first indigenous aircraft carrier (IAC) and the largest warship.
  • Shipbuilding (SB) and ship repair (SR) segment contributed 69% and 31% to the topline, respectively.
  • Sector wise Defence sector contributes about 80% to the Revenue with 20% coming from the commercial sector.
  • Cochin Shipyard achieved an all turnover of Rs. 2355.12 crores for the year 2017-18 as compared to Rs. 2058.87 crores in the year 2016-17. Cochin Shipyard recorded  profit after tax of Rs. 396.75 crores as compared to Rs. 321.55 crores for the previous year.
  • For Q1FY19, Revenue increased 18.4% YoY to  Rs. 658.7 crore but segment with  EBITDA margins of 17.1% and results were overall mixed.
  • After the Initial Public Offer of eCochin Shipyard Buyback, the Govt. of India holds 75% in the equity share capital.
  • Cochin Shipyard paid a dividend of Rs. 122.34 crores to Government of India for FY17-18.
Assessment: 
  • The size of  Cochin Shipyard Buyback is quite small at Rs. 200 crore which may result in a lower acceptance for retail.
  • On eve of Cochin Shipyard Buyback , the stock has moved up from 370-375 levels to current Rs. 400 levels. The stock at this price for this size of issue does not hold much promise from arbitrage angle and may even come under slight pressure.  
  • Like recent NLACO & NLC India Buybacks, I expect Cochin Shipyard 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.