Tata Investment Corp on 13-11-18 informed that the Board of Directors will consider a proposal for buyback on 16-11-18. Tata Investment Buyback as approved by its BOD on 16-11-18, entails a proposal to buyback up to 45,00,000 Equity Shares (Forty Five Lakhs Only) of the Company for an aggregate amount not exceeding Rs. 450 Crores at Rs.1 ,000 (Rupees One Thousand Only) per Equity Share. Tata Investment Buyback represents 8.17% of the paid-up equity share capital of the Company and is on a proportionate basis under “Tender Offer” route.
Tata Investment Buyback 2018
|Announcement of Intent for Buyback||13-11-18|
|Market price a day before this (Rs.)||750|
|Board meeting for Buyback||16-11-18|
|Buy Back Type||Tender Offer|
|Buy Back Price||1,000|
|Market Price before Board meeting||832|
|Market Price a day after Board meeting|
|% Premium on Market Price||20.19%|
|Buy Back Size in Rs. Crore||450|
|Buy Back Size ( Shares)||4,500,000|
|Equity Capital in crore||55.10|
|Tot Number of shares||55,095,296|
|Face Value of Share in Rs.||10|
|Market Price as on RD for buyback|
|Buy Back Issue date||Yet to Happen|
|Market Price on issue Closing Date||Yet to Happen|
|Indicative Mrkt Pr aft return of Shares|
|Buyback Shares reserved for Retail||675,000|
|No. retail Shareholders on RD|
|No. of Retail Shares on RD Buyback||Yet to Happen|
|Buyback Entitlement||Yet to Happen|
|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|
|Overall Retail Aceeptance||Yet to Happen|
Tata Investment Buyback: A Framework to Estimate Acceptance Ratio
This framework is based on estimation of shareholding of Tata Investment shareholders who hold around 250 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.
Based on approximations indicated above and considering a average tendering ratio as many investors in this company may be very long term investors, acceptance ratio for Tata Investment Buyback may fall in the region of 30-45%. Since retail shareholding of Tata Investment Corp is not very high, it may get impacted by any large scale purchase by arbitrage investors which may result in lower acceptance ratio. However in such case price of stock should also move up accordingly before the buyback.
Cross Tabulation of Estimated Returns: Tata Investment 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||1,000|
|Tabulation of Absolute Returns|
|A) Based on Share Price at time of Post|
|Share Purchase Price (live)||853.70||Investment||170740||Rs.|
|Acceptance Ratio / Price Aft Buyback||710||750||770||790|
Buyback of Shares: A Primer for Retail Investors
About Tata Investment Corp Ltd.:
- Tata Investment Corporation Ltd. (TICL) is a non-banking financial company.
- TIC was promoted by Tata Sons in 1937 and went public in 1959
- Earlier named the Investment Corporation of India, the company is primarily involved in investing in long-term investments such as equity shares, debt instruments, listed and unlisted, and equity-related securities of companies in a wide range of industries.
- The sources of income of the Company consist of dividend, interest and profit on sale of investments.
Tata Investment: 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|
( in Rs. Cr.)
|Profit After Tax||91.3||22.48||42.08||34.45||72.23||17.98|
|Profit After Extra-ord item||91.3||22.48||42.08||34.45||72.23||17.98|
Assessment: Tata Investment Buyback
- Tata Investment invests in a diversified portfolio of quoted and unquoted securities of companies, including Tata Group Companies, primarily from a long term perspective.
- Change in LTCG law this year may have prompted the company to adopt buyback route to distribute profits.
- Tata Investment Corporation Limited reported standalone revenue of Rs101cr in Q2FY19, a growth of 22% yoy. EBITDA for the quarter was up 25% yoy and Net profit at Rs. 91 cr was up 26% yoy.
- Tata Investment stock has run up considerably after announcement of its intimation to go for a buyback and hence investors should moderate their return expectations accordingly.
- The Stock may open gap up on Monday due to this announcement.
- From an arbitrage angle, at present rates and considering good buyback price, Tata Investment Buyback may be a reasonable 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.