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.
Monte Carlo Buyback 2018
|MP on the day||361|
|Buy Back Price||550|
|MP befo BM||388|
|MP after BM|
|% Premium on Market Price||41.73%|
|Buy Back Size in Rs. Crore||55|
|Buy Back Size ( Shares)||1,000,000|
|Equity Capital in crore||21.73|
|Tot Number of shares||21,732,064|
|Face Value of Share in Rs.||10|
|MP as on RD|
|Buy Back Issue date||Yet to Happen|
|MP on the day||Yet to Happen|
|Shares reserved- Retail||150,000|
|Shareholders on RD|
|Shares on RD||Yet to Happen|
|Buyback Entitlement||Yet to Happen|
|No. Shareholders who bid||Yet to Happen|
|Shares Tendered||Yet to Happen|
|Tendering ratio||Yet to Happen|
|Retail response||Yet to Happen|
|Aceeptance||Yet 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.
|MP Aft Buybk|
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
|Market Cap ( Rs. Cr.)||841.14|
|Price To Earnings||16.15|
|Price To BV Ratio||1.59|
|EBIT Margin (%)||15.1|
|PAT Margin (%)||9.24|
|Debt to Equity Ratio||0.11|
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.