Monte Carlo Buyback

Monte Carlo Fashions Ltd had informed on 27-11-18 that a meeting of the Board of Directors of the Company is scheduled to be held on November 30, 2018 to consider and approve the Buy-Back of fully paid-up Equity Shares of the Company. Monte Carlo Buyback proposal as approved by its Board of Directors comprises  of buyback of the fully paid-up equity shares of face value of  10/- each , not exceeding 1,000,000  at a maximum price of  Rs. 550/- (Rupees Five Hundred Fifty Only) for an aggregate maximum amount of up to Rs. 50,000,000 (Rupees Fifty Five Crores Only). Monte Carlo Buyback represents approximately 4.60% of the total paid-up share capital of the Company and is on a proportionate basis under  “Tender Offer” route.

See List of all Forthcoming and Recent Buybacks
Monte Carlo Buyback 2018 
Particulars
Buyback 2018
Announcement 19-11-18
MP on the day361
Board meet30-11-18
Type Tender Offer
Buy Back Price550
MP befo BM388
MP after BM
% Premium on Market Price41.73%
Buy Back Size in Rs. Crore55
Buy Back Size ( Shares)1,000,000
Equity Capital in crore21.73
Tot Number of shares21,732,064
Face Value of Share in Rs.10
% Buyback4.60%
Record Date
MP as on RD
Buy Back Issue dateYet to Happen
MP on the dayYet to Happen
Shares reserved- Retail 150,000
Shareholders on RD
Shares on RD Yet to Happen
Buyback EntitlementYet to Happen
No. Shareholders who bidYet to Happen
Shares Tendered Yet to Happen
Tendering ratioYet to Happen
Retail responseYet to Happen
AceeptanceYet to Happen
Monte Carlo Buyback: Framework to Estimate Acceptance Ratio:

This framework is based on estimation of shareholding of Monte Carlo Fashions shareholders  who hold around 500 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. 

Based on approximations indicated above, the entitlement ratio for Monte Carlo Buyback is expected to be low. Considering a high tendering ratio, under normal circumstances Monte Carlo Buyback could have an acceptance ratio of 8-15%.

Cross Tabulation of Estimated Returns for Monte Carlo 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
450
Nos.
Buyback Price550
Absolute Returns
Price (live)377.00
investment (Rs.)169650
MP Aft Buybk
Acceptance %330350370
8%-7.80%-2.92%1.96%
10%-6.63%-1.86%2.92%
15%-3.71%0.80%5.31%

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 Monte Carlo :
  • The Company was incorporated as a subsidiary of Oswal Woolen mills Ltd. (OWML). Subsequently, pursuant to the scheme of arrangement and demerger with OWML the business carried out by OWML, comprising the processes of manufacturing, buying, selling, and dealing in knitted, hosiery, woollen, cotton garments, distribution and franchisee network were transferred from OWML to the Company, with effect from 2011.
  • Company is one of the leading branded apparel Company has successfully expanded its horizon by introducing new product ranges.
  • It has created a comprehensive range of wool and cotton, cotton blended, knitted and woven apparels, and home furnishing through some of its ranges under umbrella brand name “Monte Carlo” such as Luxuria, Denim, Alpha, and Tweens etc. Mote Carlo has also launched its Fitness and Fashion wear range in the name of “ROCK IT”.
  • Monte Carlo Fashions has a wide distribution network with a presence across India through 2,500 plus Multi Brand Outlets (MBOs), 236 Exclusive Brand Outlets (EBOs) and 207 national chain store outlets.
Monte Carlo : Summary of Financials,  Stock Price Trend

Parameter

Figures
Market Cap ( Rs. Cr.)841.14
EPS TTM23.97
Price To Earnings16.15
Book Value 243.39
Price To BV Ratio1.59
EBIT Margin (%)15.1
PAT Margin (%)9.24
ROCE (%)17.03
 Debt to Equity Ratio0.11

montecarlo buyback
Assessment: Monte Carlo Buyback
  • Monte Carlo Fashions reported poor financial performance in quarter ended Sep-18.
  • Monte Carlo fashions declared dividend of Rs. 12 (120%) in FY18.
  • In the Financial Year 2017-18,  Monte Carlo Fashions reported growth of 11% in the revenue from operations which  increased to Rs. 646 crore from Rs. 585 crore  achieved last year. The Net Profit for the period rose 35% to Rs. 59.7 crore. 
  • The Company is virtually debt free.
  • Monte Carlo Fashions  has been maintaining a healthy dividend payout of  43.25%
  • Monte Carlo despite good brands and presence in a growing industry, enjoys little investor confidence as reflected in a low PE ratio vis a vis peers.
  • From an arbitrage angle, at present rates and considering the buyback price, Monte Carlo Buyback (Monte Carlo Fashions Buyback) is not  attractive opportunity for arbitrage investors. However Q3FY19 results  if good can lend some support to the share price. 
  • 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.