Granules India informed on 16-01-20 that the Board of Directors of the Company at its meeting to be held on Jan 20, 2020 will also consider the proposal for Buy-back of shares. Granules India Buyback as approved by its Board on 20-01-20 entails a proposal to buyback of up to 1,25,00,000 (One crore twenty five lacs only) equity shares of the Company at a price at Rs. 200/- (Rupees two hundred only) per equity share for an aggregate amount not exceeding Rs. 250 crores. Granules India Buyback represents approximately 4.92% of the total number of equity shares in the paid-up share capital of the Company and is on a proportionate basis under “Tender Offer” route.
Granules India Buyback : Key Info
Particular / Year
Buy Back 2020
|Buy Back first intimation||16-01-20|
|Market Price a day prior to this||137.5|
|Market Price a day after this||147.5|
|Buy Back Board meeting Date||21-01-20|
|Buy Back Type||Tender Offer|
|Buy Back Price||200|
|Market Price on day of Board meeting for Buyback||145.5|
|Market Price a day after Buyback Board Meeting||140.35|
|% Premium on Market Price||37.46%|
|Buy Back Size in Rs. Crore||250.00|
|Buy Back Size ( Shares)||12,500,000|
|Equity Capital in crore||25.42|
|Face Value of Share in Rs.||1|
|% Buyback of Equity||4.92%|
|Buyback shares Retail||1,875,000|
|Buy Back Issue date||08-06:19-06-20|
|Shares on RD||16,828,637|
- Issue Opens: June 8 – June 19, 2020
- Entitlement : 1 Equity Shares out of every 9 Equity Shares
- RD for Granules India Buyback : 20-03-20
Granules India Buyback : Acceptance Ratio Possibilities
This framework is based on estimation of number of Granules India shareholders who hold around 1500 number of shares. To this we have added estimates/approximations 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 assumptions indicated above and considering a moderate tendering ratio, under normal circumstances Granules India Buyback could have entitlement Ratio of 10-20% . Acceptance ratio could vary depending on price trend exhibited by stock and number of new arbitrage investors.
Return Scenarios: Granules India Buyback
The absolute returns (Profit/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 due to elections. 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.
|Price (bef RD)||152.00|
|MP Aft Buybk|
About Granules India
- Granules India is primarily involved in the manufacturing and selling of all three components of the pharmaceutical manufacturing value chain including Active Pharmaceutical Ingredients (APIs), Pharmaceutical Formulation Intermediates (PFIs) and Finished Dosages (FDs).
- It has a state-of-the-art manufacturing facilities that are catered to quality conscious customers. Granules India facilities serve customers in more than 65 countries, with offices in India, U.S., U.K., Colombia and China.
- Granules India fully integrated infrastructure includes R&D, manufacturing and marketing.
- Granules India has focus on volume based products such as Paracetamol, Metformin HCl, Ibuprofen, Guaifenesin, Methocarbamol.
- It has newly added Cetrizine and Fexofenadine to is products.
Granules India: Price Trend, Summary of Financials
|Market Cap- Rs. Cr||3,572|
|CMP in Rs.||140.5|
|Revenue – cr. (TTM)||2348.77|
|Net profit-cr (TTM)||235.3|
|Equity Share Capital||25.42|
|Price / Earning (PE)||15.18|
|Price / BV||2.28|
|Sales 3 yr CAGR||16.48%|
|Debt / Equity Ratio||0.54|
|52 week H/L||152.60 / 83.70|
Assessment: Granules India Buyback
- Vertically integrated pharmaceutical company with significant capacity, Large scale manufacturing with sustained competitive advantage & secured supply source for the customers
- Promoters had pledged 30.29% of their holding. The promoters have recently released pledge on some shares.
- Promoter holding has decreased by -8.96% over last 3 years. Currently it stands at 42.91%.
- Management has guided that Capex is largely completed. EBITDA improvement has been indicated due to higher capacity utilization
- 86% of revenues of Granules India are from exports. Out of these 73% of revenues come from regulated markets of US, Europe and Canada ,LATAM contributes nearly 10% of revenues.
- Granules India is shifting towards high margin business and it plans to achieve 25% annualised profit growth for the next three years.
- Stock has seen a good run up after announcement of Q2FY20 results. This quarter results are in line and improvement oiin profitaility seems intact.
- Company reported good results in Q2FY20 and also in Q3FY20 with improvement in EBITDA margins. The Net profit has high only marginally due to one time provision. Granules India reported a net profit of Rs64cr in Q3FY20, rising 10.3% yoy, from Rs58cr in Q3FY19. Its income from operations rose 11% yoy to Rs704cr in Q3FY20.
- The divestment of Granules Biocause Pharmaceutical Co. Limited, a Joint Venture Company located in China, has progressed further with a one-time provision charged for impairment of INR 32.03 Cr provision taken in Q3FY20 32 cr. loss booked on it in JV in China which the company says was not longer attractive.
- It was reported on end Nov, 2019 that Blackstone Group, KKR & Co, Apax Partners, Advent International and Bain Capital were among the leading global private-equity companies engaged in early-stage discussions to acquire Granules India.
- Granules India stock after a good run in last few months closed down after the announcement of results and buyback.
- I intend to participate in Granules India Buyback with a small to medium exposure. Returns will depend considerably on rate post buyback.
Standard disclaimer: Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering and Management . Iam also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2). This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/ Buy Back/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.