Dhanuka Agritech Limited on 2-11-18 informed that the Board of Directors will consider a proposal for buyback along with the results on 14-11-18. Dhanuka Agritech Buyback as approved by its BOD on 14-11-18, comprises buyback of upto 15,00,000 (Fifteen lakhs) Equity Shares at a buyback price of Rs. 550 per share aggregating to about Rs. 82.5 crore. Dhanuka Buyback represents 3.06% of the paid-up equity share capital of the Company and is on a proportionate basis under “Tender Offer” route.
Dhanuka Agritech Buyback 2018 and 2017
|Announcement of Intent for Buyback||02-11-18|
|Market price a day before this (Rs.)||364|
|Board meeting for Buyback||14-11-18||10-11-16|
|Buy Back Type||Tender Offer||Tender Offer|
|Buy Back Price||550||850|
|Market Price before Board meeting||418||22,864|
|Market Price a day after Board meeting||410||22249|
|% Premium on Market Price||31.58%||-96.28%|
|Buy Back Size in Rs. Crore||82.5||80|
|Buy Back Size ( Shares)||1,500,000||941,176|
|Equity Capital in crore||9.82||10.00|
|Tot Number of shares||49,078,324||50,019,500|
|Face Value of Share in Rs.||2||2|
|Market Price as on RD for buyback||23,098|
|Buy Back Issue date||Yet to Happen||01-03-17: 15-03-17|
|Market Price on issue Closing Date||Yet to Happen||22,633|
|Indicative Mrkt Pr aft return of Shares||21,915|
|Buyback Shares reserved for Retail||225,000||141,176|
|No. retail Shareholders on RD||10,300|
|No. of Retail Shares on RD Buyback||Yet to Happen||812,101|
|Buyback Entitlement||Yet to Happen||17%|
|No. retail Shareholders who bid||Yet to Happen||1604|
|Shares Tendered by Retail||Yet to Happen||247671|
|Tendering ratio||Yet to Happen||30.50%|
|Retail response||Yet to Happen|
|Overall Retail Aceeptance||Yet to Happen||57%|
Dhanuka Buyback: A Framework to Estimate Acceptance Ratio
This framework is based on estimation of shareholding of Dhanuka Agritech shareholders who hold around 450 number of shares. 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 few shares by arbitrage investors.
3) Inputs from last buyback
Based on approximations indicated above, the entitlement ratio for Dhanuka Agritech Buyback is expected to be low. Dhanuka Agritech buyback could have an acceptance ratio of 10-20%.
Cross Tabulation of Estimated Returns: Dhanuka 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||550|
|Tabulation of Absolute Returns|
|A) Based on Share Price at time of Post|
|Share Purchase Price (Live)||426.00||Investment||191700||Rs.|
|Acceptance Ratio / Price Aft Buyback||385||400||415||430|
Buyback of Shares: A Primer for Retail Investors
About Dhanuka Agritech Limited :
- Dhanuka Agritech Limited is the umbrella company for the business of agro–chemicals, fertilizers, and seeds of Dhanuka Group.
- It has 4 modern manufacturing facilities at Gurgaon and Sohna in Haryana, Sanand in Gujarat and Udhampur in J&K for formulation of various grades of pesticides, fungicides, miticides, weedicides, plant growth stimulants, plant growth regulators, foliar fertilizers and sticking agents.
- It also has 2 Seed Processing Units at Mandideep in M.P. and Turkapalli (Hyderabad) in Andhra Pradesh.
- Dhanuka Agritech Limited has a pan-India presence through its marketing offices in all major states in India, with a network of more than 7,000 distributors/ dealers selling to over 75,000 retailers across India and reaching out to more than 10 million farmers.
- The Company has technical tie-ups with 4 American, 5 Japanese & 2 European Companies.
Dhanuka Agritech: Summary of Financials, Stock Price Trend
|Market Cap (in Rs. Cr.)||2,045|
|Earning Per Share (TTM)||25.72|
|Price To Earnings (P/E) Ratio||16.2|
|Price To BV||3.23|
|EBIT Margin (%)||17.22|
|PAT Margin (%)||12.92|
|Debt to Equity Ratio||0.01|
Assessment: Dhanuka Agritech Buyback
- Dhanuka Agritech is into specialty & generic chemical biz and management has indicated a revenue growth of 15% going ahead.
- Dhanuka Agritech posted 4.22 percent jump in net profit at Rs 55.04 crore in the second quarter of 2018-19
- Its net income rose 10.39 percent to Rs 383.36 crore in the July-September quarter of 2018-19 from Rs 347.26 crore in the year-ago period
- Dhanuka Agritech is not in F&O which can lead to volatility in share price post buyback.
- Inline Q2FY19 results may lend support to share price post buyback.
- From an arbitrage angle, at present rates and considering below average acceptance ratio, Dhanuka Buyback may be an average opportunity for arbitrage investors depending on the entry price, it may offer in coming days.
- These are my estimates only and please do your own diligence in this matter as even what may appear as totally safe arbitrage investments in stock markets have inherent risks.
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. Further the data in the post is prone to errors.