AARTI DRUGS LTD. had informed that the meeting of the Board of Directors of the Company is scheduled on 15/03/2019 ,inter alia, to consider and approve proposal of buyback of the fully paid-up equity shares of the Company. eClerx Buyback approved by its Board on 14-03-19 comprises buyback for an aggregate amount not exceeding Rs. 262 crore, at a maximum price of Rs. 1,600 (Maximum Buy-Back Price’) from the existing equity shareholders of the Company i.e. up to 63,63,636 Equity Shares of the Company. eClerx Buyback represents approximately 4.23 % of the total paid-up equity capital of the Company and is on a proportionate basis under “Tender Offer” route.
Aarti Drugs Buyback 2019 & 2018 : Key Info
|MP befo announcement||640||705.85|
|MP aft announement||653||738.4|
|MP befo BM||669.15||732|
|MP aft BM||657||767|
|Buy Back Price||900||875|
|% Premium on MP||36.99%||14.08%|
|BuyBack Size- Rs. Cr||25.39||24.06|
|BuyBack Size- Shares||282,100||275,000|
|Tot No.of shares||23,582,100||23,857,100|
|Equity Capital- cr||23.58||23.8571|
|FV of Share in Rs.||10||10|
|Buy Back Issue date||Yet to Happen||14-02:28-02-19|
|Shares reserved- Retail||42,315||41250|
|Shareholders on RD||14715|
|Shares on RD||Yet to Happen||1,301,074|
|Buyback Entitlement||Yet to Happen||3.17%|
|Shares Tendered||Yet to Happen||575,344|
|Tendering ratio||Yet to Happen||44.22%|
|Retail response||Yet to Happen||1394.77%|
|Aceeptance %||Yet to Happen||7.17%|
Aarti Drugs Buyback : Acceptance Ratio Possibilities:
This framework is based on estimation of shareholding of Aarti Drugs shareholders who hold around 300 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) Data from Previous Buybacks
Based on approximations indicated above and considering a moderate tendering ratio, under normal circumstances Aarti Drugs Buyback could have acceptance ratio of 6-10 %.
Return Scenarios: Aarti Drugs 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 some scenarios for 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.
About Aarti Drugs Limited
- Aarti Drugs Limited (ADL), incorporated in 1984, is engaged in the business of manufacturing generic bulk actives, advanced intermediates and specialty chemicals. The company is part of $265 million Aarti Group of Industries.
- ADL manufactures drugs in therapeutic segments such as anti–arthritis, anti–fungal, antibiotics, anti–diabetic, anti–cholinergic, sedatives, anti–depressant, anti–diarrhea and anti–inflammatory. The company’smanufacturing facilities are located at Tarapur and Sarigam.
- ADL manufactures active pharmaceuticals ingredients (API) and steroids. Under API, it manufactures products such as aceclofenac, clopidogrel bisulphate, ketoconazole, metformin HCl, hydroxyzine pomoate, ketoconazole, irbesartan and many more. The company manufactures steroids such as hydrocortisone sodium succinate sterile, hydrocortisone acetate, hydrocortisone and hemisuccinate
- Aarti Drugs manufactures pharma intermediates for irbesartan, Zolpidem Tartrate, Tamsulosin HCL, Leflunomide and Levocetirizine
- Aarti Drugs is the largest manufacturer of Metronidazole and Metronidazole benzoate in the gastrointestinal segment. The company is one of the largest manufacturers of Metformin HCl in anti-diabetic segment. ADL is the largest producer of Celecoxib-NSAIDs in India. The company is the largest producer of Ketoconazole and Itriconazole-antifungal drugs in India.
- ADL’s products are exported to over 85 countries across the globe. It has received Export House Status recognition of from Government of India. The company has clientele namely Sanofi–Aventis, Merck, Teva , Searle, Pfizer, Bayer and Clariant to name a few.
- Aarti Drugs’ R&D programs are currently focused on new products amongest non–steroidal NSAID compounds, antiparasitic, calciun antagonist, antianginal, antidiabetics, antdepressant and many more. The company has also planned to work on speciality chemicals and agro chemicals.
- The company’s R&D centre at Turbhe near Mumbai, focuses on developing new value added molecules. This facility is recognised by Department of Science and Industrial Research and Government of India.
- The company also undertakes contract manufacturing for its customers.
Aarti Drugs: Price Trend, Summary of Financials
|Market Cap in Rs. Cr||1,552|
|Revenue FY18 in cr||1,160|
|CMP in Rs.||659|
|Price / Earning (PE)||17.94|
|Price / BV||3.14|
|Sales 3 yr CAGR||4.27%|
|Debt / Equity Ratio||1.19|
|52 week High/Low||705.00 / 495.00|
Assessment: Aarti Drugs Buyback
- Promoter’s stake in Aarti Drugs has increased
- Company is not debt free
- Many analysts are of the opinion that API segment is likely to do well due to factors related to the industry in China.
- ADL derives the benefits from the presence over the entire value chain from intermediates–API-Formulations. The company’s formulation manufacturing facility is located at Baddi in Himachal Pradesh and the business is growing at 15% per annum.
- Buyback issue size is small in line with earlier Buybacks and is meant as a tax efficient way to distribute products in lieu of Dividends. With possibility that Buyback acceptance ratio may be restricted tgo single digits, the gain/loss to investor will depend much more on performance of Aarti Drugs Limited stock which in recent times has been exhibiting some firmness than from buyback at a higher price. .
- Results of FY 19 are expected before the completion of Aarti Drugs buyback and will influence the possible returns. Also there may be considerable volatility due to elections.
- Aarti Drugs Limited is not in F&O which may keep stock under pressure post buyback.
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.