NIIT Ltd. had informed the stock exchanges on 02/08/19 that the meeting of the Board of Directors of the Company is scheduled on 10/08/2019 to consider Buy-back of fully paid-up equity shares of the Company. NIIT Buyback as approved by the board entails a proposal for buyback of up to 26,800,000 fully paid-up Equity Shares of the Company of face value Rs. 2 each, for an aggregate amount not exceeding Rs. 335 crore at a price of Rs. 125/- . NIIT Buyback represents approximately 16% of the total paid-up Equity Share Capital of the Company and is on a proportionate basis under “Tender Offer” route. .
NIIT Buyback : Key Info
|MP after this||94.15|
|MP before BM||97.8|
|Buy Back Price||125|
|% Premium on MP||36.40%|
|MP after BM|
|BuyBack Size Rs. Cr||335|
|BuyBack Size- Shrs||26800000|
|Tot No. shares||167,601,735|
|Equity Capital- cr||33.52|
|FV of Share in Rs.||2|
|Shares - Retail||4,020,000|
|Buy Back Issue date|
|Shares on RD|
NIIT Buyback: Acceptance Ratio Possibilities
This framework is based on estimation of shareholding of NIIT Ltd. shareholders who hold around 2000 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. This is expected to be low.
2) Purchase of Shares by Arbitrage investors.
NIIT Buyback could result in 20-30% acceptance ratio.
Return Scenarios: NIIT 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 NIIT Ltd.
- Established in 1981, NIIT Limited, a global leader in Skills and Talent Development, offers multi-disciplinary learning management and training delivery solutions to corporations, institutions, and individuals in over 40 countries. The company provides managed training services including custom content development and curriculum design, learning administration, learning delivery, strategic sourcing, and learning technology.
- NIIT Ltd. serves geographical segments which include India, America, Europe and Asia Pacific.
- Its lines of business include Corporate Learning Group (CLG), Skills and Careers Group (SNC), and School Learning Group (SLG).
- CLG offers managed training services, custom curriculum design and content development, learning administration, learning delivery, strategic sourcing, learning technology and advisory services.
- SNC delivers learning and talent development programs in areas of banking, finance and insurance, soft skills, management education, multi-sectorial vocational skills, digital media marketing and new-age information technology (IT).
- SLG provides teaching and learning solutions to schools. SLG offerings include Quick School, Math Lab and IT Wizard programs.
NIIT Ltd. : Price Trend, Summary of Financials
|Market Cap- Rs. Cr||1,641|
|CMP in Rs.||98.0|
|Net profit-cr ttm||86.44|
|Equity Share Capital||33.5|
|Price / Earning (PE)||18.98|
|Price / BV||2.00|
|Sales 3 yr CAGR||-0.70%|
|Debt / Equity Ratio||0.25|
|52 week H/L||116.90 / 60.60|
Assessment: NIIT Buyback
- NIIT Ltd. completed divestment of NIIT Technologies to private equity firm Baring Private equity Asia through its affiliate Hulst B.V. for a consideration of INR 20,204 Mn and thus the company is flush with cash. The Buyback issue size has been limited by the 25% cap (Paid up equity + reserves).
- In Q1FY20, NIIT Ltd. Revenue at INR 2,103 Mn was down 2% YoY; EBITDA at INR 220 Mn was up 16% YoY; operating Margin was up 159 bps YoY
- For FY19, NIIT Ltd. recorded Revenue at Rs. 910.2 Cr (up 7%), EBITDA of 84.2 crore (up 13%) and PAT at Rs. 86.4 Cr, up 38% YoY;
- NIIT Ltd. has been maintaining a healthy dividend payout. Stock is providing a good dividend yield of 5.10%.
- Due to increase in cash post stake sale in NIIT Tech, NIIT Ltd. could see a good jump in profit after tax even as its core business may remain intact.
- I purchased some shares in NIIT Ltd after the announcement on Aug 2, 2019 and as the share could open gap up on Aug 13,2019 , I may consider to participate in NIIT buyback in a small way at levels not significantly higher from current levels or when prices moderate at some point of time as the NIIT Buyback RD could be about 1-2 months from now.
- NIIT Ltd. is not in F&O, prices post NIIT buyback can be volatile. A reasonable performance in Q1FY20, relative stability in income on account of its portfolio of services, markets having corrected considerably and good cash position, may provide a good cushion .
- NIIT through the Buyback is giving back only a portion of its cash, post NIIT Tech stake sale and there is possibility that it may offer a higher dividend in this financial year.
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.