RITES Buyback approved in its Board meeting on 18-09-20 entails buyback of 96,98,113 equity shares at a price of Rs. 265 (Rupees Two Hundred Sixty Five only) per equity share for an aggregate consideration not exceeding Rs. 257 Crore. RITES Buyback amounts to 3.88% of the total number of equity and is through the tender route. The Board has fixed Sept, 30, 2020 as the Record Date for determining the entitlement and the names of the Eligible Shareholders to RITES Buyback.

See List of all Forthcoming and Recent Buybacks

RITES Buyback: Updates
  • RD 30-Sep-20
RITES Buyback 2020 : Info
Buyback
TypeTender
Announcement 14-09-20
MP befo announcement247
MP aft announcement251
MP befo BM255
Board meet18-09-20
Buy Back Price265
% Premium on MP3.92%
BuyBack Size- Rs. Cr257
BuyBack Size- Shares9,698,113
Tot No.of shares250,000,000
% Buyback3.88%
Equity Capital- cr250.00
FV of Share in Rs.10
Record Date30-09-20
Buy Back Issue date
Shares reserved- Retail 1,454,717
Shares on RD
Buyback Entitlement
Shares Tendered
Tendering ratio
Retail response
Aceeptance %
RITES Buyback: Broad Estimate of Aceeptance % range

1) Few additional purchase  of Shares by existing shareholders with eye on earning additional returns through buyback. 2) Purchase of  few shares by arbitrage investors.

Based on approximations indicated above, the entitlement ratio for RITES Buyback is expected to be tad below 20%. Buyback could have an acceptance ratio of ~ 25-35%.

Cross Tabulation of Estimated Returns: RITES 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.

Shares Bought
250
Nos.
Buyback Price265
Price (Live)241
Investment (Rs.)60125
Absolute Returns %
MP Aft Buybk
Acceptance %240245250
20%1.87%3.53%5.20%
30%2.91%4.37%5.82%
40%3.95%5.20%6.44%

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 RITES :
  • RITES Limited is a wholly owned Government Company, under ministry of Railways. RITES was incorporated in 1973 and is a Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise.
  • Based on Public Enterprise Survey 2015-2016, RITES is ranked no. 1 based on net profit and dividend declared in Industrial Development and Technical Consultancy Services sector.
  • RITES has an experience spanning 45 years and has undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions.
  • RITES is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia)
  • RITES Limited is also working on projects in Nepal, Africa, Sri Lanka ,Guyana (South America).
RITES Buyback: Summary of Financials,  Stock Price Trend
Market Cap- Rs. Cr6,313
CMP in Rs.253
Revenue – cr. (TTM)2,272
Net profit-cr (TTM)596.17
Equity Share Capital250
Face Value10
EPS TTM23.85
Price / Earning (PE)10.59
Book Value105.33
Price / BV0.10
ROCE %34.27%
ROE  %25.01%
Sales 3 yr CAGR22.34%
Dividend Yield0.15%
Debt / Equity Ratio0.02
52 week  H/L Rs. 331.00 / 190.65

Assessment: RITES Buyback

  • RITES was benefit of being associated with the Indian Railways, which is the fourth longest rail network in the world
  • RITES Ltd. is a debt free company and follows an asset light model.
  • Its growth in revenue and profitability has been consistent over the last few years.
  • The company’s order book is strong giving good revenue visibility for next 2-3 years.
  • RITES stock is providing a good dividend yield of 6.26%.
  • RITES has been maintaining a healthy dividend payout of 50.45%.
  • RITES reported weak results in Q1FY21. RITES’ total consolidated revenue decreased to Rs. 379 crore as against Rs. 573 crore in Q1. Operating revenue, was Rs. 335 crore in Q1 FY21, as against Rs. 538 crore in Q1 FY20. Decrease in revenue is mainly due to disrfuptions on account of COVID leading to lower exports and reduced field work.
  • RITES performance may depend on the general recovery which H2 may see.
  • From an arbitrage angle, due to lower buyback price even as the buyback acceptgance can be moderat. RITES Buyback is not very attractive opportunity for arbitrage investors.  I may add few shares on a dip in price. The returns may however be supported by traction in the stock price which has been subdued for quite some time and any rerarting in Railways stocks or order wins by RITES.

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.