Coal India had informed on 30-01-19 that the meeting of the Board of Directors of the Company is scheduled on 04-02-19 ,inter alia, to consider and approve to consider the proposal for buyback of the fully paid-up equity shares of the Company. Coal India Buyback as approved in its board Meeting on 04-02-19, entails a buyback of its own fully paid equity shares not exceeding 4,46,80,850 (Four Crore Forty Six Lakhs Eighty Thousand Eight Hundred Fifty) equity shares at a price of Rs. 235/-per equity share for an aggregate consideration not exceeding Rs. 1,050 Crore . Coal India Buyback is approximately 0.72% of the paid-up share capital of the Company and is on a proportionate basis under “Tender Offer route”. Record Date for Coal India Buyback is 15.02.19.
Coal India Buyback 2018 , 2016
The details of coal India buyback are given in the table below.
|MP a day before||224||311|
|Buy Back Type||Tender Offer||Tender Offer|
|Market Price before Board meeting||222||320.5|
|% Premium on Market Price||5.86%||4.52%|
|Equity Capital in crore||6207.41||6316.36|
|Tot Number of shares||6,207,409,177||6316364400|
|Face Value of Share in Rs.||10||10|
|Buy Back Size in Rs. Crore||1050.00||3650.00|
|Buy Back Size ( Shares||44,680,850||108,955,223|
|Buyback reserved for Retail||6,702,128||16,343,283|
|No. of Retail Shares on RD Buyback||Yet to Happen||107,191,037|
|Buyback Entitlement||Yet to Happen||15.25%|
|Shares Tendered by retail||Yet to Happen||2854743|
|Tendering ratio||Yet to Happen||2.66%|
|Retail response||Yet to Happen||17.47%|
|Actual Retail Aceeptance||Yet to Happen||100%|
Coal India Buyback : Estimate of Acceptance Ratio:
This framework is based on estimation of shareholding of SQS India BFSI 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 Coal India Buyback Buyback is expected to around 8-12%. Considering a low tendering ratio, under normal circumstances Coal India Buyback could have an acceptance ratio in 20-35% depending on how much new arbitrage investors buy into the stock and more important the tendering ratio by existing investors.
Estimated Returns for Coal India 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.
|A) Abs Returns|
|Pr 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 Coal India Limited
- Coal India is the largest coal producing company in the world.
- The company also produces non–coking coal and coking coal for diverse applications.
- The 11 coalfields in which it conduct its most significant mining operations are the Korba, Singrauli, Talcher, IB Valley, Wardha Valley, Jharia, North Karanpura, Central India Coalfields, Raniganj, Rajmahal/Deogarh and East Bokaro coalfields.
- Its customers include large thermal power generation companies, steel and cement producers with most of the company coal used in the thermal power sector.
- The company has nine direct Subsidiaries and two indirect Subsidiaries.
Coal India : Price Trend, Summary of Financials
To be updated Later
Assessment: Coal India Buyback
- Coal India Buyback size is small due to need for faster disinvestment without going for a board resolution and is based on its standalone balance sheet.
- Coal India Q3FY19 results shall be out on 12-02-19
- Coal India is virtually debt free & holds large cash reserves.
- Though Coal India is a cash rich company and is trading at a low price, it does not appear to be very attractive opportunity at this stage due to low size and low buyback price and further Q3Fy19 results will be known on 12-02-19 only.
- 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.