Responsive Industries Ltd Board of Directors of the Company i held on October 17, 2018, approved its unaudited Financial Results and a proposal to buy-back of equity shares of the Company on a proportionate basis through the tender route. Responsive Industries buyback entails purchase of Equity Shares not exceeding 2,07,50,000 Equity Shares at a price of Rs. 77 per Equity Share, for an aggregate amount of up to Rs. 159.77 crore. This Responsive Industries buyback represents 7.77% of the total paid-up equity capital of the Company.
Responsive Industries Buyback
|Announcement of Intent for Buyback||09-10-18|
|Market price a day before this||71.95|
|Board meeting for Buyback||17-10-18|
|Buy Back Type||Tender Offer|
|Buy Back Price||77|
|Market Price before Board meeting||69.95|
|Market Price after Board meeting||72.6|
|% Premium on Market Price||10.08%|
|Buy Back Size in Rs. Crore||159.78|
|Buy Back Size ( Shares)||20,750,000|
|Equity Capital in crore||26.691|
|Tot Number of shares||266,912,700|
|Face Value of Share in Rs.||1|
|Market Price as on RD for buyback||Yet to Happen|
|Market Price on issue Closing Date||Yet to Happen|
|Buy Back Issue date||Yet to Happen|
|Buyback Shares reserved for Retail||3,112,500|
|No. of Retail Shares on RD Buyback||Yet to Happen|
|Buyback Entitlement||Yet to Happen|
|No. retail Shareholders who bid||Yet to Happen|
|Shares Tendered by retail||Yet to Happen|
|Tendering ratio||Yet to Happen|
|Retail response||Yet to Happen|
|Actual Retail Aceeptance||Yet to Happen|
|Indicative Mrkt Pr aft return of Shares|
Responsive Industries Buyback: A Framework to Estimate Acceptance Ratio:
This framework is based on estimation of shareholding of Responsive Industries 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.
Based on approximations indicated above, and taking a considerably a reasonable tendering ratio, Responsive Industries buyback could have a acceptance ratio in 45%-65% band under normal circumstances. Any increase in Responsive Industries share price in intervening period will result in increase of this ratio as the % tendering will go down and vice versa if Responsive Industries price drifts lower.
Cross Tabulation of Estimated Returns for Responsive Industries 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||77|
|Tabulation of Absolute Returns|
|A) Based on Share Price at time of Post|
|Share Purchase Price taken||72||Investment||180000||Rs.|
|Acceptance Ratio / Price Aft Buyback||64||68||72||76|
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About Responsive Industries :
- The company was formerly known as Responsive Polymers Limited and changed its name to Responsive Industries Limited in 2007. The company was founded in 1982 and is based in Mumbai, India
- Responsive Industries Ltd. is a leading global manufacturer of polyvinyl chloride (PVC) based products.
- The company is among the leading four producers of vinyl flooring internationally and the largest Indian producer of PVC flooring and synthetic leather cloth.
- Responsive serves multiple industries like healthcare, hospitality, transportation, IT and telecom, retail, education, sports infrastructure and real estate. It has sales to 65 countries and has a wide network of over 300 retailers spread across India
- Its plan of focusing on high value products seems to have started yielding dividends.
- Responsive Industries has retired its ECB Loan and is a Zero debt company now.
|Profit After Tax||18.4||16.29||3.82||4.92||1.45||2.88|
Assessment:Responsive Industries Buyback
- Company is changing its product portfolio which has resulted in lower Revenues in last few quarters but Margins have seen considerable uptick from last two quarters.
- Responsive Industries sales rose 25.46% to Rs 224.70 crore and Net profit galloped to Rs 18.40 crore in the quarter ended September 2018 as against Rs 1.45 crore in same quarter last year.
- Having already declared the RD with the Board announcement of Buyback, I expect Responsive Industries Buyback to proceed at a good speed & expect these good quarterly numbers to support the share price.
- The company is being a small cap & not in F&O which could lead to some volatility post buyback. Good results reported by the company may be able to provide some amount of cushion.
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.