Ajanata Pharma had informed on 25-01-19 that the meeting of the Board of Directors of the Company is scheduled on 30-01-19 ,inter alia, to consider and approve to consider the proposal for buyback of the fully paid-up equity shares of the Company. Ajanta Pharma Buyback as approved in its board Meeting on 30-01-19, entails buyback not exceeding 7,69,230 (Seven Lakhs sixty-nine thousand two hundred thirty) equity shares at a price of Rs. 1,300/- per equity share for an aggregate consideration not exceeding Rs. 100 crores. Ajanta Pharma Buyback is approximately 0.98% of the total paid-up share capital of the Company and is on a proportionate basis under “Tender Offer route”.
Earlier Buyback, Bonus
- Ajanta Pharma in 2009 carried out a buyback of Company”s shares through stock exchange for an amount of Rs. 11.36 crs. at a price not exceeding Rs. 101 per share.
- Bonus of 1:2 in 2013
Ajanta Pharma Buyback 2018
The details of Ajanta Pharma buyback are given in the table below.
|MP on the day||1126|
|Buy Back Price||1,300|
|MP befo BM||1,089|
|MP after BM|
|% Premium on MP||19.38%|
|BuyBack Size- Rs. Cr||100|
|BuyBack Size- Shares||769,230|
|Shares reserved- Retail||115,385|
|Equity Capital- cr||17.60|
|Tot No.of shares||88,014,500|
|FV of Share in Rs.||2|
|Result postal Ballot|
|MP as on RD|
|Buy Back Issue date|
|Shareholders on RD|
|Shares on RD|
Ajanta Pharma Buyback: Estimate of Acceptance Ratio:
This framework is based on estimation of shareholding of Ajanta Pharma shareholders who hold around 200 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 Ajanta Pharma Buyback is not expected to be high. Considering an av. tendering ratio, under normal circumstances Ajanta Pharma Buyback could have an acceptance ratio in 10-20% depending on how much new arbitrage investors buy into the stock.
Estimated Returns for Ajanta Pharma 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.
About Ajanta Pharma
- Established in 1973 and headquartered in Mumbai-India,
Ajanta Pharma is a specialty pharmaceutical company engaged in development, manufacture and marketing of quality finished dosages in domestic and international markets
- Ajanta operates 7 state-of-the-art manufacturing facilities in India and Mauritius. 2 of the facilities in India have been successfully approved by US FDA
- Ajanta Pharma branded generics business is spread in India and more than 30 emerging countries across Africa, CIS, the Middle East and South East Asia. In India we have presence in high growth specialty segments of cardiology, dermatology, ophthalmology and pain management
- Company’s Institutional business comprises of supplies to various government bodies in India and supply of Anti-Malarial products under WHO approved programs in Africa.
- Company’s state of the art R&D centres for formulation development and API are located at Mumbai, having a team of 850+ scientists
Ajanta Pharma : Price Trend, Summary of Financials
|Market Cap in Rs. Cr||9,584|
|Revenue FY18 in cr||2,172.00|
|CMP in Rs.||1089|
|Price / Earning (PE)||19.25|
|Price / BV||4.53|
|Sales 3 yr CAGR||10.41%|
|Debt / Equity Ratio||0|
Assessment: Ajanta Pharma Buyback
- Ajanta Pharma Q3 FY 2019 performance was poor
- Income from operations at Rs. 485 cr. against Rs. 587 cr., down 17%.
- EBITDA at Rs. 107 cr. against Rs. 198 cr., down 46%;
- Profit after tax at Rs. 67 cr., against Rs. 147 cr., down 55%
- As per management, Ajanta Pharma EBIDTA margins were impacted due to operational cost of two new plants being fully charged, whereas the capacity utilization was low which is expected to pickup in coming quarters.
- Ajanta Pharma consolidated income from operations for FY 2018 was 2131 cr with growth of 6%. Net Profit
was469 cr. – down by 8%.
- Ajant Pharma is virtually debt free
- For last 5 financial years, Ajanta Pharma has posted healthy performance with its consolidated total income growing at 15% CAGR and net profit at 19% CAGR.
- Though Buyback price is attractive,poor results in Q3FY19 coupled with small issue size may make the Ajanata Pharma Buyback of little interest to arbitrage investors at this price.
- Ajanta Pharma is in F&O which mat help to curb some volatility post the buyback offer.
- 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.