ata Investment Corporation Limited Buyback

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.

See List of all Forthcoming and Recent Buybacks
Tata Investment Buyback 2018
Particulars
Buyback 2018
Announcement of Intent for Buyback13-11-18
Market price a day before this (Rs.)750
Board meeting for Buyback16-11-18
Buy Back Type Tender Offer
Buy Back Price1,000
Market Price before Board meeting832
Market Price a day after Board meeting
% Premium on Market Price20.19%
Buy Back Size in Rs. Crore450
Buy Back Size ( Shares)4,500,000
Equity Capital in crore55.10
Tot Number of shares55,095,296
Face Value of Share in Rs.10
% Buyback8.17%
Record Date
Market Price as on RD for buyback
Buy Back Issue dateYet to Happen
Market Price on issue Closing DateYet 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 BuybackYet to Happen
Buyback EntitlementYet to Happen
No. retail Shareholders who bidYet to Happen
Shares Tendered by RetailYet to Happen
Tendering ratioYet to Happen
Retail responseYet to Happen
Overall Retail AceeptanceYet 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.

Shares Purchased
200
Nos.
Share Buyback Price1,000
Tabulation of Absolute Returns
A) Based on Share Price at time of Post
Share Purchase Price (live)853.70Investment170740Rs.
Acceptance Ratio / Price Aft Buyback 710750770790
30%-6.64%-3.36%-1.72%-0.08%
35%-4.94%-1.90%-0.37%1.15%
40%-3.24%-0.43%0.97%2.38%
45%-1.55%1.03%2.32%3.61%
50%0.15%2.50%3.67%4.84%
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
 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

Parameter

Figures
Market Cap (in Rs.  Cr.)2,045
Earning Per Share (TTM) 25.72
Price To Earnings (P/E) Ratio16.2
Book Value 129.05
Price To BV3.23
EBIT Margin (%)17.22
PAT Margin (%)12.92
ROCE (%)28.79
Debt to Equity Ratio0.01

Tata Investment Buyback price chart

( in Rs. Cr.)

Particulars

Sep-18Jun-18Mar-18Dec-17Sep-17Jun-17
Total Income100.631.0158.3647.0282.4125.41
Total Expenditure5.634.65.563.466.664.48
PBIDT94.9726.4152.843.5675.7520.93
Interest000000
PBDT94.9726.4152.843.5675.7520.93
Depreciation0.010.020.060.020.020.01
Tax3.84.0410.659.094.142.46
Deferred Tax-0.14-0.1300-0.640.48
Profit After Tax91.322.4842.0834.4572.2317.98
Extra-ordinary Items000000
Profit After Extra-ord item91.322.4842.0834.4572.2317.98
EPS 16.574.087.646.2513.113.26
Equity55.155.155.155.155.155.1
PBIDTM(%)94.485.3690.592.6491.9282.63
PBDTM(%)94.485.3690.592.6491.9282.63
PATM(%)90.7672.6672.1373.2787.6570.98

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.