NHPC on 9-11-2018 informed that its Board of Directors shall also consider a proposal for buyback along with the quarterly results on 14-11-18. NHPC Buyback as approved by its BOD comprises buyback of upto 21,42,85,714 fully paid equity shares of the Company at a price of Rs. 28 per share aggregating to about Rs. 600 crore. NHPC Buyback is on a proportionate basis under “Tender Offer” route. The government held 73.67% stake in NHPC Ltd, as on September 30, 2018.
NHPC Buyback 2018 and 2016
|Announcement of Intent for Buyback||9-11-2018|
|Market price a day before this intent||25.05|
|Market price a day aft this intent||26.03|
|Board meeting for Buyback||14-11-18||07-02-17|
|Buy Back Type||Tender Offer||Tender Offer|
|Buy Back Price||28||32.25|
|Market Price before Board meeting||27||31.25|
|Market Price a day after Board meet|
|% Premium on Market Price||3.70%||3.20%|
|Buy Back Size in Rs. Crore||600||2617|
|Buy Back Size ( Shares)||214,285,714||811,347,977|
|Equity Capital in crore||10259.32||11070.67|
|Tot Number of shares||10,259,320,519||11,070,668,496|
|Face Value of Share in Rs.||10||10|
|Govt Holding in the company||73.67|
|Individual Holding in compnay||4.53%|
|Market Price as on RD for buyback||Yet to Happen||28.3|
|Market Price on issue Closing Date||Yet to Happen|
|Buy Back Issue date||Yet to Happen||03-03-17: 17-03-17|
|Indicative Mrkt Pr aft return of Shares||27.55|
|Buyback Shares reserved for Retail||32,142,857||121,702,197|
|No. of Retail Shrholders on RD||821503|
|No. of Retail Shares on RD Buyback||Yet to Happen||498,996,424|
|Buyback Entitlement||Yet to Happen||24.39%|
|No. retail Shareholders who bid||Yet to Happen||28163|
|Shares Tendered by retail||Yet to Happen||54025794|
|Tendering ratio||Yet to Happen||10.83%|
|Retail response||Yet to Happen||44.39%|
|Actual Retail Aceeptance||Yet to Happen||100|
NHPC Buyback: A Framework to Estimate Acceptance Ratio:
This framework is based on estimation of shareholding of NHPC shareholders who hold around 7000 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 Shares by arbitrage investors.
3) Inputs from last buyback
Based on approximations indicated above, the entitlement ratio for NHPC Buyback is expected to be low. NHPC Buyback could have an acceptance ratio in the range of 15-25%.
Cross Tabulation of Estimated Returns for NHPC 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.
No. of Shares
|MP when Posted||26.25|
|MP aft Buybk|
Buyback of Shares: A Primer for Retail Investors
About NHPC Limited:
- NHPC Limited is India’s premier hydro power company and a ‘Mini Ratna’ Category-I Enterprise of the Government of India
- NHPC Limited is the largest organisation for hydropower development in India, with capabilities to undertake all the activities from conceptualization to commissioning in relation to setting up of hydro projects.
- NHPC Limited is also planning to take Wind and Tidal wave projects in the country.
- NHPC Limited presently has an installation base of 7097 MW from 24 hydropower stations on ownership basis including projects taken up in Joint Venture. NHPC Limited is presently engaged in the construction of 2 projects aggregating to a total installed capacity of 2800 MW.
- NHPC Limited has drawn up an ambitious plan to add about 6,000 MW of hydropower capacity by the end of year 2022.
NHPC : Summary of Financials, Stock Price Trend
|Market Cap ( Rs. Cr.)||27,135.85|
|Earning Per Share ( TTM)||2.42|
|Price To Earnings (P/E)||10.93|
|Price To BV||1.12|
|EBIT Margin (%)||59.39|
|PAT Margin (%)||39.78|
|Debt to Equity Ratio||0.77|
Assessment: NHPC Buyback
- NHPC’s has an established position in India’s hydropower generation.
- NHPC has been getting consistent support from the GoI in terms of low-cost subordinated debt for some of its projects.
- Moody’s has upgraded international rating of NHPC from Baa3 positive to Baa2 stable, which is equivalent to sovereign rating of India.
- NHPC registered a total income of ` 8,425.03 crore and Profit After Tax (PAT) of Rs. 2,758.65 crore in financial year 2017-18 as compared to Rs. 8,728.84 crore and Rs. 2,795.59 crore respectively in the previous year.
- NHPC made Cash contribution of Rs. 1,688.17 crore to exchequer through dividend, dividend tax, income tax and wealth tax in the financial year 2017-18.
- NHPC net profit up 19.62% at Rs 1,218.51 cr in Q2FY19. Revenue rose by 26.6% yoy to Rs2,495cr. EBITDA stood at Rs1,597cr, up 43.2% yoy.
- NHPC buyback 2017 resulted in 100% acceptance.
- With the GoI’s thrust on large scale deployment of solar power, hydropower would be required for grid balancing/stability
- NHPC is in F&O which can provide some support to share price post buyback.
- From an arbitrage angle, at present rates and issue size, the returns in NHPC Buyback may be meager and the share could drift lower tomorrow after this buyback announcement. Q2FY19 Results which are inline may support the share going forward.
- 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.