Greaves Cotton has informed the stock exchanges on 26-04-19 that the meeting of the Board of Directors of the Company is scheduled on 02-05-19 to consider and approve the results and Buy-back of fully paid-up equity shares of the Company. Greaves Cotton Buyback has been approved by the Board at at a tender price of Rs. 175 (Rupees One Hundred and
Seventy-Five only) per Equity Share (hereinafter referred to as the “Buyback Price”) for an aggregate amount not exceeding Rs. 240 Crores and comprises buyback of 1,37,14,286 shares. Greaves Cotton Buyback is 5.6% of the total paid-up equity share capital and is through the Tender route.

See List of all Forthcoming and Recent Buybacks

Buyback News

Updates

  • RD for Buyback 12-07-19

Greaves Cotton Buyback 2019 : Key Info

Buyback 19
Type Tender
MP befo announcement140.6
Announcement 26-04-19
MP after above149
MP befo BM149
Board meet02-05-19
Buy Back Price175
% Premium on MP17.45%
MP after BM
BuyBack Size- Rs. Cr240
BuyBack Size- Shares13,714,286
Tot No.of shares244,206,795
% Buyback5.62%
Equity Capital- cr48.84
FV of Share in Rs.2
Record Date12-07-19
Buy Back Issue date
Shares reserved- Retail 2,057,143
Shares on RD
Buyback Entitlement
Shares Tendered
Tendering ratio
Retail response
Aceeptance %

Greaves Cotton Buyback : Acceptance Ratio Possibilities

This framework is based on estimation Greaves Cotton shareholders who hold around 1500 number of shares. To this we have added estimates for
1) 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 and considering a good tendering ratio, under normal circumstances Greaves Cotton Buyback could have acceptance ratio of 13-23% , a figure that will also depend to some extent on new arbitrage investors who buy into the stock and the tendering ratio.

Return Scenarios: Greaves Cotton Buyback

The absolute returns (Profit/Loss) that may accrue to an Investors/Arbitrage trader are a function ofhis entry price, 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.

Shares Bought
1200
Nos.
Buyback Price175
Absolute Returns
Price (live)138.25
Investment (Rs.)165900
MP Aft Buybk
Acceptance %136138141
15%2.60%3.83%5.68%
20%4.01%5.17%6.91%
25%5.42%6.51%8.14%
30%6.84%7.85%9.37%

(to be updated )

About Greaves Cotton

  • Greaves Cotton is a company with 160 year old engineering legacy spreading across India and a growing global presence,
  • Greaves Cotton is engaged in manufacturing of engines, engine applications and trading of power tillers, spares related to engines and construction equipment / infrastructure equipment etc.
  • Diesel and CNG/Petrol portfolio on track for BS-VI launch, customer tie ups in progress.
  • Greaves Cotton has 6 state-of-the-art manufacturing facilities across India
  • Greaves Cotton has a World class R&D setup
  • Extensive pan-India network over of over 5000+ dealers
  • In the Automotive Engine segment, the Company provides fuel agnostic power-train solutions to three-wheeled passenger and cargo vehicles and four-wheeled mini-truck
  • The company plans to sell 2-W ( 2 wheeler) ampere vehicles and 3-W e-rickshaws. This along with multi brand spares and services will make it one stop integrated services company. Company has already entered into selling third party after sales spare parts, Farm Equipment and Genset business.
  • Greaves Cotton has established a complete portfolio of Oil and electric Pumpsets.

Greaves Cotton: Price Trend, Summary of Financials

Financial Overview

Market Cap- Rs. Cr3,426
CMP in Rs.140.3
Revenue FY18 – cr1792.1
Net profit202.62
Equity Share Capital48.84
Face Value2
EPS8.30
Price / Earning (PE)16.91
Book Value85.67
Price / BV1.64
ROCE %25.94%
ROE  %17.73%
Dividend Yield3.92%
Sales 3 yr CAGR2.00%
Debt / Equity Ratio0
52 week High/Low165.00 / 111.05

Shareholding Pattern

Shareholder Category% Holding
Promoters51.90
Mutual Funds16.02%
AIFs 2.73 %
FII’s etc14.02%
Insurance Companies8.75%
Individual with < 2 L nominal shares14.29%

Assessment: Greaves Cotton Buyback

  • Greaves Cotton is Market Leader in 3W Diesel Engine which contributes about half its revenue. 24% of its revenue acomes form Aftermarket sales and remaining from other areas.
  • Greaves Cotton traditional 3W (3 wheeler) engines business continues to remain under pressure due to shift away from diesel engines and possible steep increase in their prices due to to strict BS6 emission norms.
  • Greaves Cotton reported Flat Financial performance in Dec-18. Q3 Revenue at 447 Rs. Cr (+11% vs last year), YTD at +5%. Gross Margins adverse due to changeover from BSIII to BSIV as well as due to commodity inflation
  • Greaves Cotton reported Q4FY19 Revenue at Rs.528Cr (+9% vs last year). Profit After Tax was at Rs. 37 crore (includes provision on account of IL&FS Rs. 15.5 crore) as against Rs. 57 crore in Q4 FY18 (includes exceptional income of Rs. 13 crore).
  • Greaves Cotton margins may continue to be under pressure due to shift to BS6 norms and its attempts to diversify through multi brand products and electric scooters which may have lower margins.
  • Greaves Cotton is virtually debt free.
  • The Stock is providing a dividend yield of 3.92%. with a dividend payout of 69.34%.
  • Greaves Cotton management has been strengthened with induction of professionals who have good experience with renowned companies.
  • Greaves Cotton being not in F&O, the prices post buyback may not be stable.
  • Due to a rather heavy retail investor base, Greaves Cotton ratio may not be high, limiting the arbitrage returns in the stock at this price level. Any +ve developments in Business can lend support to the price. Greaves Cotton has a decent track record and is trying to establish itself on many new areas as its diesel engine business could face regrowth in future.

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.