GAIL Buyback: Snapshot

TypeTender
BuyBack Size- Shares69,756,641
Buy Back Price150
BuyBack Size- Rs. Cr1046.35
% Buyback /equity1.55%
Board meet15-01-21
MP befo BM144
% Premium on MP4.17%
Record Date28-01-21
Shares reserved- Retail10,463,496

GAIL Buyback: Updates
  • 28-01-21; Also RD for Rs.2.5 Dividend

See List of all Buybacks

GAIL Buyback 2020: Info
GAIL Buyback
Buyback '20
TypeTender
BuyBack Size- Shares69,756,641
Buy Back Price150
BuyBack Size- Rs. Cr1046.35
% Buyback /equity1.55%
Board meet15-01-21
MP befo BM144
% Premium on MP4.17%
Record Date28-01-21
Shares reserved- Retail 10,463,496
Announcement 11-01-21
MP befo announcement135.7
MP aft announcement
Tot No.of shares 4,510,141,866
FV of Share in Rs.10
Equity Capital- cr4,510.14
Buy Back Issue date
Shares on RD
Buyback Entitlement
Shares Tendered
Tendering ratio
Retail response
Aceeptance %
GAIL Buyback: Broad Estimates

Cross Tabulation of Estimated Returns: GAIL Buyback

This framework to estimate the % acceptance of shares tendered in the buyback is broadly based on
1) Estimate of number of existing investors with value of holding <= 2 Lacs
2) Estimate of few additional Shares purchased by existing shareholders with eye on earning additional returns through buyback.
3) Purchase of shares by arbitrage investors.
Based on above, the estimates for the Buyback are:
Entitlement ratio : around 8- 12%
Acceptance ratio: around 20-25%
( Any increase in share price after RD and prior to close of buyback will increase these ratios and vice versa). some small uptick from this Acceptance number is not ruled out as GAIL may have more dormant share holders or those not willing to tender shares than my assumptions. )

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 ans stock price are affected by a plethora of factors including financial results, changes in internal and external business environment, market sentiment and more so after end of buyback. We have depicted  estimated Absolute Returns in table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.

Shares Bought
1000
Nos.
Buyback Price150
Price (Live)142
Investment (Rs.)141750
Investment (Less Div)139250
Absolute Returns %
MP Aft Buybk
Acceptance %130135140
20%-3.77%-0.90%1.97%
23%-3.34%-0.57%2.19%
26%-2.91%-0.25%2.41%
30%-2.33%0.18%2.69%

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 GAIL :
  • Established in 1984, GAIL, erstwhile known as Gas Authority of India Limited was incorporated with an objective to create gas sector infrastructure for sustained development of the natural gas sector in the country.
  • GAIL is India’s flagship natural gas company. Its activities encompass all aspects of the natural gas value chain including exploration and production, processing, transmission, distribution and marketing and related services.
GAIL (India) Limited | Why Join GAIL:--
  • Its flagship project, the 2800 km. long Hazira–Vijaipur–Jagdishpur (HVJ) pipeline became operational in 1991.
  • GAIL owns over 70% of India’s gas transmission network, operating around 12,426 km of natural gas trunk pipeline.
  • in FYE 20, natural gas transmission segment has witnessed 4.5% increase of gross revenue compared to previous year and GAIL transported 108.37 MMSCMD in FY 2019-20.
  • Company is executing around 7,500 km of pipeline projects in various parts.
  • The pipeline laying activities include Pradhan Mantri Urja Ganga pipeline, also known as Jagdishpur-Haldia and Bokaro-Dhamra Pipeline (JHBDPL) across 6 states of Bihar, Uttar Pradesh, Jharkhand, Odisha, West Bengal and Assam.
  • GAIL also commissioned 165 km Gorakhpur section of JHBDPL and 350 km section of KKMBPL pipeline last year

GAIL Buyback: Stock Price Trend:

Assessment: GAIL Buyback

  • Gas availability in India is expected to witness a sharp jump going forward.
  • GAIL is almost debt free.
  • GAIL has been maintaining a good dividend payout. Stock is providing a good dividend yield of 4.6%. Company has been maintaining a healthy dividend payout of 38%.
  • GAIL enjoys dominance in Gas Transmission – Market Share 70%
  • Gail in Q2FY21 reported net profit of Rs 1240 cr vs Rs 1064 cr (YoY). Revenue was down by 24.4% (YoY) at Rs 13643 cr. EBITDA was impacted due to loss in gas trading.
  • Ever since Q2FY21, GAIL has outperformed the Nifty by and more so over the last one-month.
  • GAIL stock may be supported by strong tailwinds due to increase in transmission volumes from increased domestic gas production like KG-basin, RIL and ONGC , upcoming LNG terminals and increased awareness and thrust on reducing air pollution.
  • GAIL is in F&O which providers a degree of protection esp. post the buyback period.
  • Attractiveness from Arbitrage Angle: Mild; I may add the stock on dips. One should keep expectations low due to little difference in CMP and Buyback price and current market state.
  • Rs. 2.5 dividend will also accrue to share holders.
  • A good Q3FY21 show by GAIL can shore up the returns. Even in a stable market, GAIL shares may see small uptrend.
  • Time Frame – about 2 months from RD of 28-01-2021
  • Disclosure: I have added some GAIL stock in last 2 months as well as recently.

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.

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