JB Chemicals & Pharmaceuticals Ltd informed that the Board of Directors of the Company at its meeting to be held on November 12, 2019 will also consider the proposal for Buy-back. JB Chemicals Buyback as approved by its Board on 12-11-19 entails buyback of up to 29,54,545 fully paid-up Equity Shares of face value of Rs. 2/- each by the Company price of Rs. 440/- per Equity Share payable ior a total consideration not exceeding Rs.130 crores.
JB Chemicals Buyback represents approximately 3.68% of the total paid-up Equity Share Capital of the Company and is on a proportionate basis under “Tender Offer” route. JB Chemicals Buyback is 9.33% and 9.38% of the total paid-up equity share capital and free reserves of the company. The company has fixed Nov 22, 2019 as the RD for purpose of determining eligibility for Buyback.
JB Chemicals Buyback 2019, 2018 : Key Info
|Buyback 2019||Buyback 2018|
|MP a day before||361||270|
|MP next day||381.25||277|
|MP before BM||393||338.3|
|Buy Back Price||440||340|
|MP aft BM||340|
|% Premium on MP||15.41%||22.74%|
|MP after BM||274.3|
|BuyBack Size Rs. Cr||130.00||113.33|
|BuyBack Size- Shrs||2,954,545||3,333,333|
|Tot No. shares||80,236,642||83,550,000|
|Equity Capital- cr||16.0473284||16.71|
|FV of Share in Rs.||2||2|
|Shares - Retail||443,182||500,000|
|Buy Back Issue date||10-10: 24-10-18|
|investors on RD||29,248|
|Shares on RD||4,238,965|
JB Chemicals Buyback : Acceptance Ratio Possibilities
This framework is based on estimation of number of JB Chemicals shareholders who hold around 300 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.
3) Data from Previous Buybacks
Based on assumptions indicated above and considering a moderate tendering ratio, under normal circumstances JB Chemicals Buyback could have acceptance ratio of 20-30%, a figure that will depend to a good extent on new arbitrage investors who buy into the stock and price fluctuation in the stock as an uptrend in stock many times is used by arbitrage investors to exit even before the buyback. Also considering possibility of a stake sale, some investors may not tender their shares.
Return Scenarios: JB Chemicals 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.
|MP Aft Buybk|
About JB Chemicals & Pharmaceuticals Ltd
- Started in 1976 as an API and formulations manufacturer, JB Chemicals is owned by JB Mody and family.
- JB Chemicals has a diversified revenue an is engaged in the business of manufacture and marketing of diverse range of pharmaceutical formulations, herbal remedies and APIs.
- For FY2018, about 42% of the consolidated revenue was derived from India while rest came from international market.
- Its popular brands include Rantac (anti-peptic ulcerant), Cilacar (calcium channel blocker), and Metrogyl (amoebicides). Nicardia . These brands account for bulk of its domestic revenue.
- Outside India, JB Chemicals has a presence in regulated and semi-regulated markets, which includes Russia and CIS states. it has Operating subsidiares in Russia and South Africa.
- JB Chemicals manufacturing units are located in Ankleshwar, Panoli (Gujarat), and Daman which are FDA approved tablet and API plants.
JB Chemicals: Price Trend, Summary of Financials
|Market Cap- Rs. Cr||3,186|
|CMP in Rs.||397.0|
|Revenue – cr. (TTM)||1556|
|Net profit-cr (TTM)||199|
|Equity Share Capital||16.05|
|Price / Earning (PE)||16.01|
|Price / BV||2.15|
|Sales 3 yr CAGR||0.73%|
|Debt / Equity Ratio||0.02|
|52 week H/L||411.00 / 272.30|
Assessment: JB Chemicals Buyback
- For the quarter ended 30-06-2019 (Q1FY20), the company has reported consolidated sales of Rs 446.11 crore, up 6.49 % from last quarter sales of Rs 418.92 crore and up 9.63 % from last year same quarter sales of Rs 406.92 crore. The company has reported net profit after tax of Rs 62.11 crore in the latest quarter.
- For the quarter ended 30-09-2019 (Q2FY20) , the company has reported consolidated sales of Rs 448.53 crore, up 6.49 % from last year quarter sales of Rs 426.62 crore. J.B. Chemicals reports robust EBITDA growth of 37.22% in Q2FY20. Profit after tax has seen a jump of 82.17% aided by lower taxation rates (yoy basis).
- crore in the latest quarter Promoter holding: 56.02 %, MF & institutions hold 21.29% in the company.
- The company has delivered a average growth of about 9% over past five years as well as three years. On the other hand 5 year CAGR PAT growth has been 25.83%.
- Company is virtually debt free. It had cash and cash equivalents of Rs 422 crore as on December 31, 2018.
- There were reports in May 2019 that the promoters wanted to sell their stake. Lupin, Piramal Healthcare were said to be in race for stake in JB Chemicals.
- The stock has appreciated considerably and from buyback p[rice and prevailing market [rice and keeping in mind the expected acceptance, there os not much scope for arbitrage. However good Q2FY20 results can re-rate the stock and maintain its reasonable price levels post completion of 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.