SKF India Limited, Board of Directors in their meeting held on October 24, 2018, approved a proposal for buyback of fully paid up equity shares of the Company . SKF Buyback shall be on a proportionate basis through the ‘Tender Offer’ method at a price of INR 2,100 per Equity (FV Rs. 10) Share for an aggregate maximum amount of INR 3,990 million only . SKF Buyback covers all the shareholders of the Company including the promoters and members of the promoter group as on record date to be decided in due course. SKF India did a buyback last year also by tender route.SKF Buyback: Latest Updates:
- SKF Buyback: Issue Date 23-01-19 : 05-02-19
- SKF Buyback Entitlement ratio for Retail is 35.85%
- SKF Buyback Record date is 21-12-18.
SKF Buyback 2018 & 2017
|Announcement of Intent for Buyback||19-10-18||08-02-17|
|Market price a day before this||1700||1360|
|Board meeting for Buyback||24-10-2018||13-02-17|
|Buy Back Type||Tender Offer||Tender Offer|
|Buy Back Price||2100||1500|
|Market Price before Board meeting||1711||1407|
|Market Price a day after Board meeting|
|% Premium on Market Price||22.74%||6.61%|
|Buy Back Size in Rs. Crore||399||390|
|Buy Back Size ( Shares)||1,900,000||2,600,000|
|Equity Capital in crore||51.34||52.73|
|Tot Number of shares||51,337,963||52,732,538|
|Face Value of Share in Rs.||10||10|
|Market Price on issue Closing Date||Yet to Happen|
|Buy Back Issue date||23-01:05-02-19||25-05: 05-06-17|
|Indicative Mrkt Pr aft return of Shares|
|Buyback Shares reserved for Retail||285,000||390,000|
|No. of Retail Shares on RD Buyback||795085||689,177|
|No. retail Shareholders who bid||Yet to Happen|
|Shares Tendered by retail||Yet to Happen||590|
|Tendering ratio||Yet to Happen||0.09%|
|Retail response||Yet to Happen||0.15%|
|Overall Retail Aceeptance||Yet to Happen||100.00%|
SKF Buyback: A Framework to Estimate Acceptance Ratio:
This framework is based on estimation of shareholding of SKF investors who hold around 110 number of shares as on 31/03/2018. 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) We have taken into account Data from SKF Buyback 2017 into consideration.Based on approximations indicated above, and taking a a reasonable tendering ratio, SKF buyback could have an acceptance ratio in 30%-45% band under normal circumstances. As there is good gap in current marker price of Rs. 1710 & Buyback price of Rs. 2100, it may attract more arbitrage traders but it could still maintain 25% plus acceptance ratio.
Cross Tabulation of Estimated Returns for SKF 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. In the recent past my Buybacks like Jagran Prakashan Buyback 2018 have ended in losses for arbitrage traders. We have depicted estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
|Share Buyback Price||2100|
|MP when Posted||1711|
|Pr aft Buybk|
- SKF India is a part of the SKF Group, a leading global supplier of rolling bearing and seals.
- SKF business is organised into four groups:
- Automotive business unit
- Electrical business unit
- Industrial business unit and
- Service business unit.
- SKF India has dedicated an Application Development Center at Bangalore responsible for customizing products & services.
- SKF India (SKF) reported healthy Q1FY19 results. While Revenues grew 13.3% YoY at INR 755 crore, EBITDA grew 24% YoY to INR 116 crore .
- In Q1FY19, Auto contributed 43%, exports 7% & industrial 50% to its Revenues.
- Net Sales for the Q2FY19 amounted to INR 7660 million as compared to INR 6798 million for the second quarter of the previous year, registering a growth of 12.7%. Profit After Tax amounted to INR 843 million as compared to INR 740 million for the same quarter in the previous year, registering a growth of 14%.
Price Chart & Quarterly Results: SKF LimitedQuarterly Results
|Profit After Tax||84.3||80.86||71.56||86.15||73.96||64.27|
Assessment: SKF Buyback
- SKF came out with good results i n Q1FY19 & Q2FY19. This is likely to support share price
- In the case of Downturn in Auto demand threre could have some impact on company but company presently has enough demand for what it produces at its two plants.
- Based on market price of Rs. 1710 today and a buyback price of Rs. 2100 and if estimates of acceptance hold true, there seems to be reasonably good arbitrage opportunity in SKF Buyback. The stock could open gap up tomorrow in view of this and thus the estimated returns will change accordingly.
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.