Gandhi Special Tubes Ltd informed on 20-05-19 that in its Board meeting on 14-05-19, the Board will also consider Proposal to Buyback shares of the Company of face value of Rs. 5/- each. Gandhi Special Tubes Buyback approved by its Board on 28-05-19 comprises Proposal to Buy-back upto 900,000 (Nine Lakh) fully Paid-up Equity Shares for an aggregate amount not exceeding Rs. 49.5 crore. The Gandhi Special Tubes Buyback amounts to 24.94 % of the total Paid-up Equity Capital and free reserves of the Company. Gandhi Special Tubes Buyback represents approximately 6.51% of the total paid-up equity capital of the Company and is on a proportionate basis under “Tender Offer” route.
See List of all Forthcoming and Recent Buybacks
Updates
- Entitlement Ratio: 12.48%
- Issue date 25-09 : 10-10-19
- Dividend Rs. 9, RD 12-07-19
Gandhi Special Tubes Buyback : Key Info
Buyback 19 | Buyback 18 | |
|---|---|---|
| Type | Tender | Tender |
| MP befo announcement | 352.3 | 368.05 |
| Announcement | 20-05-19 | 11-12-17 |
| MP after above | 378.1 | |
| MP befo BM | 408 | |
| Board meet | 28-05-19 | 18-12-17 |
| Buy Back Price | 550 | 500 |
| % Premium on MP | 34.80% | 35.85% |
| MP after BM | ||
| BuyBack Size- Rs. Cr | 49.5 | 44 |
| BuyBack Size- Shares | 900,000 | 880000 |
| Tot No.of shares | 13,818,616 | 14,698,616 |
| % Buyback | 6.51% | 5.99% |
| Equity Capital- cr | 6.91 | 7.35 |
| FV of Share in Rs. | 5 | 5 |
| Record Date | 16-08-19 | 09-02-18 |
| Buy Back Issue date | 25-09:10-10-19 | 06-03:19-03-18 |
| Shares reserved- Retail | 135,000 | 132,000 |
| Shares on RD | 1082067 | 1119805 |
| Buyback Entitlement | 12.48% | 11.79% |
| Shares Tendered | 455624 | 547198 |
| Tendering ratio | 42.11% | 48.87% |
| Retail response | 337.50% | 414.54% |
| Aceeptance % | 29.63% | 24.12% |
Gandhi Special Tubes Buyback : Estimate of Acceptance Ratio:
This framework is based on estimation of shareholding of Gandhi Special Tubes 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 and data of previous Buyback
Based on approximations indicated above and considering a moderate tendering ratio, under normal circumstances Gandhi Special Tubes Buyback could have acceptance ratio of 10-20%, a figure that will depend significantly on price movement of the stock in coming days.
Estimated Returns: Gandhi Special Tubes 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 kep 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.
Buyback 19 | Buyback 18 | |
|---|---|---|
| Type | Tender | Tender |
| MP befo announcement | 352.3 | 368.05 |
| Announcement | 20-05-19 | 11-12-17 |
| MP after above | 378.1 | |
| MP befo BM | 408 | |
| Board meet | 28-05-19 | 18-12-17 |
| Buy Back Price | 550 | 500 |
| % Premium on MP | 34.80% | 35.85% |
| MP after BM | ||
| BuyBack Size- Rs. Cr | 49.5 | 44 |
| BuyBack Size- Shares | 900,000 | 880000 |
| Tot No.of shares | 13,818,616 | 14,698,616 |
| % Buyback | 6.51% | 5.99% |
| Equity Capital- cr | 6.91 | 7.35 |
| FV of Share in Rs. | 5 | 5 |
| Record Date | 16-08-19 | 09-02-18 |
| Buy Back Issue date | 25-09:10-10-19 | 06-03:19-03-18 |
| Shares reserved- Retail | 135,000 | 132,000 |
| Shares on RD | 1082067 | 1119805 |
| Buyback Entitlement | 12.48% | 11.79% |
| Shares Tendered | 455624 | 547198 |
| Tendering ratio | 42.11% | 48.87% |
| Retail response | 337.50% | 414.54% |
| Aceeptance % | 29.63% | 24.12% |
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 Gandhi Special Tubes
- The Company was incorporated in 1985 in Maharashtra, India, as “Gandhi Special 07 Tubes Limited”, a public limited company under the Indian Companies Act, 1956.
- The Company name was changed to “Gandhi Special Tubes Limited” on November 6, 1995.
- The Company started its manufacturing activities with the tubes of 0.7 mm wall thickness and at that time it was intended that the Company’s main product wouldbe tubes with 0.7 mm wall thickness. Over a period of time, the Company gauged the marketing needs and started producing the tubes of various sizes and diameters. Therefore it was decided to drop “07” from the name of the Company to reflect that the Company is not a one product Company.
- Gandhi Special Tubes Ltd is manufacturing small diameter welded and cold drawn seamless steel tubes. All the critical equipment was imported from Germany.
- Gandhi Special Tubes Ltd. is also manufacturing Cold Formed Tube Nuts for Fuel Injection Tube Assemblies and other Tube Assemblies.This was a pioneering effort in India as hitherto tube nuts were being manufactured by machining. The products are marketed all over India and are also exported all over the world including Germany, UK, South East Asian countries etc.
Gandhi Special Tubes : Price Trend, Summary of Financials
Financial Overview
| Market Cap- Rs. Cr | 556 |
| CMP in Rs. | 402.4 |
| Revenue FY18 – cr | 114 |
| Net profit-cr | 33.57 |
| Equity Share Capital | 6.91 |
| Face Value | 5 |
| EPS | 24.29 |
| Price / Earning (PE) | 16.57 |
| Book Value | 128.25 |
| Price / BV | 3.14 |
| ROCE % | 24.70% |
| ROE % | 18.24% |
| Dividend Yield | 2.24 % |
| Sales 3 yr CAGR | 7.43% |
| Debt / Equity Ratio | 0 |
| 52 week High/Low | 424.85 / 326.00 |
Assessment: Gandhi Special Tubes Buyback
- Gandhi Special Tubes has along with q4fy19 results, announced dividend of Rs. 9 on Rs. 5 FV shares. This is same as last year.
- Gandhi Special Tubes came out with average Q4FY19 numbers with Total Income from Operations declining slightly on yoy basis and Margin showed some improvement.
- Gandhi Special Tubes buyback in 2018 had an acceptance ratio of 24%
- Gandhi Special Tubes Buyback price at Rs. 550 is at a good premium to the price prevailing before the buyback. However considering 10-15% jump in share price in recent times and with a moderate acceptance ratio, arbitrage returns may be muted and only an entry at lower levels can yield some returns.
- The company has to go for a postal ballot to seek share holders approval and hence the total time period may amount to 3-4 months.
- Gandhi Special Tubes 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.