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
|MP a day before||73.35|
|Buy Back Type||Tender|
|Buy Back Price||86|
|MP before BM||72|
|MP aft BM|
|% Premium on MP||19.44%|
|Buyback Size Rs. Crore||1628.30|
|Buyback Size ( Shares)||189,336,645|
|Equity Capital -crore||734.28|
|Tot No. of shares||3,671,400,000|
|% Govt Holding||63.06%|
|Price on RD|
|Buy Back Issue date||13-12: 27-12-18|
|Indicative Mrkt Pr aft return of Shares|
|Buyback Shares reserved for Retail||28,400,497|
|Retail Shares on RD Buyback||154,437,270|
|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|
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.
|MP when Posted||70.2|
|MP aft Buybk|
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
- 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
|Market Cap (in Rs. Cr.)||27,150.00|
|Price To Earnings (P/E) Ratio||28.89|
|Price To Books Raio (P/B)||0.83|
|EBIT Margin (%)||6.59|
|Net Profit Margin (%)||2.78|
|PAT Growth (%)||62.67|
|Total Debt to Equity (D/E) Ratio||0|
|Profit After Tax||185.17||155.58||457.17||153.19||115.42||80.82|
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.