NHPC Buyback

NHPC on 9-11-2018 informed that its Board of Directors shall also consider a proposal for buyback along with the quarterly results on 14-11-18. NHPC Buyback as approved by its BOD comprises buyback of upto 21,42,85,714 fully paid equity shares of the Company at a price of Rs. 28 per share aggregating to about Rs. 600 crore. NHPC Buyback is on a proportionate basis under  “Tender Offer” route. The government held 73.67% stake in NHPC Ltd, as on September 30, 2018.

NHPC Buyback: Latest Updates
NHPC Buyback actual acceptance ratio – 61.6% NHPC Buyback Likely acceptance ratio – minimum 50% Live NHPC Buyback Bidding Status  NHPC Buyback entitlement ratio 7.43 % Buyback Issue Date:  01-01-19 to 14-01-19
NHPC Buyback 2018 and 2016
Particulars
Buyback 2018
Buyback 2017
Announcement of Buyback9-11-2018
MP a day before25.05
MP a day aft26.03
Board meeting 14-11-1807-02-17
Buy Back Price2832.25
MP before BM2731.25
MP after BM
% Premium on MP3.70%3.20%
BuyBack Size Cr6002617
BuyBack Size- Shares214,285,714811,347,977
Equity Capital cr10259.3211070.67
Tot No. of shares10,259,320,51911,070,668,496
FV of Share in Rs.1010
Govt Holding 73.67
Individual Holding 4.53%
% Buyback2.09%7.33%
Record Date30-11-1820-02-17
MP on RD25.9528.3
BuyBack Issue date01-01:14-01-1903-03-17: 17-03-17
Shares reserved for Retail 32,142,857121,702,197
Shrholders on RD 705,690821503
Shares on RD 432,721,428498,996,424
Buyback Entitlement7.43%24.39%
No. retail Shr hldrd who bid3536828163
Shrs Tendered by retail5118875754025794
Tendering ratio11.83%10.83%
Retail response159.25%44.39%
Actual Retail Aceeptance62.79%100
Indicative Mrkt Pr aft return of Shares2627.55
NHPC Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on estimation of shareholding of NHPC shareholders  who hold around 7000 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. 3) Inputs from last buyback

Based on approximations indicated above, the entitlement ratio for NHPC Buyback is expected to be low.  NHPC Buyback could have an acceptance ratio in the range of 15-25%.
Cross Tabulation of Estimated Returns for NHPC 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 kept 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.

No. of Shares
7000
Nos.
Buyback Price28
Abs Returns
MP when Posted26.25
Investment (Rs.)183750
MP aft Buybk
Acceptance %24.52526
20%-4.00%-2.48%0.57%
30%-2.67%-1.33%1.33%
40%-1.33%-0.19%2.10%
CMP (Live)25
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 NHPC Limited:
    • NHPC Limited is India’s premier hydro power company and a ‘Mini Ratna’ Category-I Enterprise of the Government of India
  • NHPC Limited is the largest organisation for hydropower development in India, with capabilities to undertake all the activities from conceptualization to commissioning in relation to setting up of hydro projects.
  • NHPC Limited is also planning to take Wind and Tidal wave projects in the country.
  • NHPC Limited presently has an installation base of 7097 MW from 24 hydropower stations on ownership basis including projects taken up in Joint Venture. NHPC Limited is presently engaged in the construction of 2 projects aggregating to a total installed capacity of 2800 MW.
  • NHPC Limited has drawn up an ambitious plan to add about 6,000 MW of hydropower capacity by the end of year 2022.
NHPC : Summary of Financials,  Stock Price Trend
Parameter Figures
Market Cap ( Rs. Cr.) 27,135.85
Earning Per Share ( TTM) 2.42
Price To Earnings (P/E) 10.93
Book Value 23.55
Price To BV 1.12
EBIT Margin (%) 59.39
PAT Margin (%) 39.78
ROCE (%) 9.64
Debt to Equity Ratio 0.77
NHPC Buyback Share price chart
Assessment: NHPC Buyback
    • NHPC’s has an  established position in India’s hydropower generation.
    • NHPC has been getting consistent support from the GoI in terms of low-cost subordinated debt for some of its projects.
    • Moody’s has upgraded international rating of NHPC from Baa3 positive to Baa2 stable, which is equivalent to sovereign rating of India.
    • NHPC registered a total income of ` 8,425.03 crore and Profit After Tax (PAT) of Rs. 2,758.65 crore in financial year 2017-18 as compared to Rs. 8,728.84 crore and Rs. 2,795.59 crore respectively in the previous year.
    • NHPC made Cash contribution of Rs. 1,688.17 crore to exchequer through dividend, dividend tax, income tax and wealth tax in the financial year 2017-18.
    • NHPC net profit up 19.62% at Rs 1,218.51 cr in Q2FY19. Revenue rose by 26.6% yoy to Rs2,495cr. EBITDA stood at Rs1,597cr, up 43.2% yoy.
    • NHPC buyback 2017 resulted in 100% acceptance.
    • With the GoI’s thrust on large scale deployment of solar power, hydropower would be required for grid balancing/stability
    • NHPC is in F&O which can provide some support to share price post buyback.
    • From an arbitrage angle, at present rates and issue size, the returns in  NHPC Buyback may be meager and the share could drift lower tomorrow after  this buyback  announcement.  Q2FY19 Results which are inline  may support the share going forward.
  • These are my estimates only and please do your own diligence in this matter as even what may appear as totally safe arbitrage investments in stock markets have inherent risks.

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.