BHEL(BHARAT HEAVY ELECTRICALS LTD), Board of Directors meeting was scheduled on 25/10/2018  to consider and approve the proposal for Buyback of the fully paid-up equity shares of the Company. The Board of Directors of the Company in this meeting approved the proposal for Buyback of shares. BHEL Buyback is on a proportionate basis through a “Tender Offer” route. The BHEL Buyback proposal envisages a buyback not exceeding 18,93,36,645 ) equity shares of face value of Rs. 2 of the Company, representing 5.16% of the paid-up share capital of the Company) at a price of Rs. 86 for an aggregate consideration not exceeding Rs. 1628,29,51,470 ( ~ 1628 cores)

BHEL Buyback: Latest Updates
  • Buyback Issue 13-12-18 : 27-12-18
  • Entitlement Ratio 18.39%
BHEL Buyback 2018
Particulars
Buyback 2018
Announcement 22-10-2018
MP a day before73.35
Board meeting25-10-18
Buy Back Type Tender
Buy Back Price86
MP before BM72
MP aft BM
% Premium on MP19.44%
Buyback Size Rs. Crore1628.30
Buyback Size ( Shares)189,336,645
Equity Capital -crore734.28
Tot No. of shares3,671,400,000
Face Value 2
% Govt Holding63.06%
% Individual4.1%%
% Buyback5.16%
Record Date06-11-18
Price on RD
Buy Back Issue date13-12: 27-12-18
Indicative Mrkt Pr aft return of Shares
Buyback Shares reserved for Retail 28,400,497
Retail Shares on RD Buyback154,437,270
Buyback Entitlement18.39%
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
BHEL Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on estimation of shareholding of BHEL investors who hold around 275 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 relatively high tendering ratio of 65-70%, BHEL buyback could have a acceptance ratio in 25%-40% and a closer range would be 25%-35% band under normal circumstances. Any considerable decrease in BHEL share price as witnessed today after results announcement, will result in slight increase of this ratio as the percentage tendering will go down. However BHEL existing retail shareholding being large and issue being of a good size, impact may not be much.

Cross Tabulation of Estimated Returns for BHEL 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
2500
Nos.
Buyback Price86
Abs Returns
MP when Posted70.2
Investment (Rs.)175500
MP aft Buybk
Acceptance %6063.567
20%-7.12%-3.13%0.85%
30%-3.42%0.07%3.56%
40%0.28%3.28%6.27%
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
BHEL Bonus Record:

Bharat Heavy Electricals Ltd. has given 2 bonuses since May , 2017. 

Sept. 28, 2017  Bonus 1:2 
May 31, 2017  Bonus 1:1 

About BHEL:
  • Bharat Heavy Electricals Limited (BHEL) established in 1956 is the largest Central PSE operating in engineering and manufacturing in the energy–related/infrastructure sector t&  Heavy Electrical Equipment.
  • The company has been earning profits continuously since 1971–72 and paying dividends since 1976–77.
  • BHEL has 15 manufacturing Units and manufactures almost all critical high technology products required for power sector like Gas Turbines,Steam Turbines,Turbogenerators, Boilers, Pumps and Heat exchangers, Pulverisers and electrical switch gears.
  • BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. 

BHEL : Summary of Financials,  Stock Price Trend, Qtrly Results
Key Parameters
Market Cap (in  Rs. Cr.)27,150.00
EPS TTM2.56
Price To Earnings (P/E) Ratio28.89
Book Value 88.8
Price To Books  Raio (P/B) 0.83
EBIT Margin (%)6.59
Net Profit Margin (%)2.78
ROCE (%)5.88
PAT Growth (%)62.67
Total Debt to Equity (D/E) Ratio0

 

BHEL Buyback price trend

Quarterly Results
Particulars Sep-18Jun-18Mar-18Dec-17Sep-17Jun-17
Net Sales6606.95790.089831.896494.446256.225380.6
Total Income6931.556114.110344.876835.986681.665754.35
Total Expenditure6539.15648.258915.356403.086292.035380.46
PBIDT392.45465.851429.52432.9389.63373.89
Interest68.8863.972.5861.0355.2265.72
PBDT323.57401.951356.94371.87334.41308.17
Depreciation52.06176.1217.07182.03187.16200.14
Tax43.14103.76382.22-14.78131.6579.58
Deferred Tax43.2-33.49300.4851.43-99.82-52.37
Profit After Tax185.17155.58457.17153.19115.4280.82
EPS 0.50.421.250.420.310.33
Equity734.28734.28734.28734.28489.52489.52
Face Value222222
PBIDTM(%)5.948.0514.546.676.236.95
PBDTM(%)4.96.9413.85.735.355.73
PATM(%)2.82.694.652.361.841.5
Assessment: BHEL Buyback
  • While BHEL reported a good set of numbers in Q1FY19, its operational performance in Q2FY19 is below expectations.
  • The Net profit for Q2FY17  is higher than that of the corresponding period in last year but this is largely  due to lower depreciation provided in this quarter.
  • The company being a large cap & in F&O space, should provide some cushion to the stock. On the other hand negatives include poor image of Government companies, increasing competition in its niche Boiler turbine segment, and relatively poor  results reported by the company in Q2FY19 which may lead to downward pressure on the  stock price.
  • BHEL buybacki ssue size is reasonable in size and buyback price offed in  BHEL Buyback is decent at Rs. 86 providing even chances of arbitrage gains. However the Q2FY19 results declared today have been a significant dampener.
  • At this stage, clarity on risks primarily hinges on how the results of Q2Fy19 which fell short of market expectation are perceived by the market. If BHEL can hold even up to 3-4 % down form today’s price post buyback, there could be a moderate to good arbitrage opportunity considering the buyback price of Rs. 86/- and an average estimate of 30% buyback acceptance ratio. 

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.