SKF India Limited, Board of Directors in their meeting held on October 24, 2018,  approved a proposal for buyback of fully paid up equity shares of the Company . SKF Buyback shall be on a proportionate basis through the ‘Tender Offer’ method at a price of INR 2,100 per Equity (FV Rs. 10) Share for an aggregate maximum amount of INR 3,990 million only . SKF Buyback covers all the shareholders of the Company including the promoters and members of the promoter group as on record date to be decided in due course.  SKF India did a buyback last year also by tender route. T

SKF Buyback 2018 & 2017
Particulars
Buyback 2018
Buyback2017
Announcement of Intent for Buyback19-10-1808-02-17
Market price a day before this17001360
Board meeting for Buyback24-10-201813-02-17
Buy Back Type Tender Offer Tender Offer
Buy Back Price21001500
Market Price before Board meeting17111407
Market Price a day after Board meeting
% Premium on Market Price22.74%6.61%
Buy Back Size in Rs. Crore399390
Buy Back Size ( Shares)1,900,0002,600,000
Equity Capital in crore51.3452.73
Tot Number of shares51,337,96352,732,538
Face Value of Share in Rs.1010
% Buyback3.70%4.93%
Record Date 07-04-17
Market Price as on RD for buybackYet to Happen
Market Price on issue Closing DateYet to Happen
Buy Back Issue dateYet to Happen25-05: 05-06-17
Indicative Mrkt Pr aft return of Shares
Buyback Shares reserved for Retail 285,000390,000
No. of Retail Shares on RD BuybackYet to Happen689,177
Buyback EntitlementYet to Happen56.59%
No. retail Shareholders who bidYet to Happen
Shares Tendered by retailYet to Happen590
Tendering ratioYet to Happen0.09%
Retail responseYet to Happen0.15%
Overall Retail AceeptanceYet to Happen100.00%
SKF Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on estimation of shareholding of SKF investors who hold around 110 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) We have taken into account Data from SKF Buyback 2017 into consideration. 

Based on approximations indicated above, and taking a a reasonable tendering ratio, SKF buyback could have an acceptance ratio in 30%-45% band under normal circumstances. As there is good gap in current marker price of Rs. 1710 & Buyback price of Rs. 2100, it may attract  more arbitrage traders but it could still maintain  25% plus acceptance ratio.

Cross Tabulation of Estimated Returns for SKF 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. In the recent past my Buybacks like Jagran Prakashan Buyback 2018 have ended in losses for arbitrage traders. 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
100
Nos.
Share Buyback Price2100
Tabulation of Absolute Returns
A) Based on Share Price at time of Post
Share Purchase Price taken1711Investment171100Rs.
Acceptance Ratio / Price Aft Buyback 1650168017101740
25%3.01%4.32%5.64%6.95%
30%4.32%5.55%6.78%8.01%
40%6.95%8.01%9.06%10.11%
45%8.27%9.23%10.20%11.16%
A) Based on Current Market Price (Live)
Share Purchase Price taken1852.10Investment185210Rs.
Acceptance Ratio / Price Aft Buyback 1650168017101740
25%-4.84%-3.62%-2.41%-1.19%
30%-3.62%-2.49%-1.36%-0.22%
40%-1.19%-0.22%0.75%1.72%
45%0.02%0.91%1.80%2.69%
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 SKF
  • SKF India is a part of the SKF Group, a leading global supplier of rolling bearing and seals.
  • SKF business is organised into four groups:

    • Automotive business unit
    • Electrical business unit
    • Industrial business unit and
    • Service business unit.
  • SKF India has dedicated an Application Development Center at Bangalore responsible for customizing products & services .
  • SKF India (SKF) reported healthy Q1FY19 results.  While Revenues grew 13.3% YoY at INR 755 crore, EBITDA grew 24% YoY to INR 116 crore .
  • In Q1FY19, Auto contributed 43%, exports 7% & industrial 50% to its Revenues.
  • Net Sales for the Q2FY19 amounted to INR 7660 million as compared to INR 6798 million for the second quarter of the previous year, registering a growth of
    12.7%.  Profit After Tax amounted to INR 843 million as compared to INR 740 million for the same quarter in the previous year, registering a growth of
    14%.
Price Chart & Quarterly Results: SKF Limited
skf buyback price chart

Quarterly Results 

Particulars

Sep-18Jun-18Mar-18Dec-17Sep-17Jun-17
Net Sales766.04754.95703.64700.49679.81666.47
Total Income787.47777.48722.45720.52696.3683.6
PBIDT144.12138.55124.94143.05127.56110.7
Interest2.071.71.71.611.660
PBDT142.05136.85123.24141.44125.9110.7
Depreciation11.6511.7111.5211.2611.4211.54
Tax46.9645.3940.7248.6541.4535.56
Deferred Tax-0.86-1.11-0.56-4.62-0.93-0.67
Profit After Tax84.380.8671.5686.1573.9664.27
EPS 16.415.713.916.814.412.2
Equity51.3451.3451.3451.3451.3451.34
PBIDTM(%)18.8118.3517.7620.4218.7616.61
PBDTM(%)18.5418.1317.5120.1918.5216.61
PATM(%)1110.7110.1712.310.889.64
Assessment: SKF Buyback
  • SKF came out with good results i n Q1FY19 & Q2FY19. This is likely to support share price
  • In the case of Downturn in Auto demand threre could have some impact on company but company presently has enough demand for what it produces at its two plants.
  • Based on market price of Rs. 1710 today and a buyback price of Rs. 2100 and if estimates of acceptance hold true, there seems to be reasonably  good arbitrage opportunity in SKF Buyback. The stock could open gap up tomorrow in view of this and thus the estimated returns will change accordingly.

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.