ata Investment Corporation Limited Buyback

Tata Investment Corp on 13-11-18 informed that the Board of Directors will consider a proposal for buyback on 16-11-18. Tata Investment Buyback as approved by its BOD on 16-11-18,  entails a proposal to buyback up to 45,00,000 Equity Shares (Forty Five Lakhs Only) of the Company for an aggregate amount not exceeding Rs. 450 Crores at Rs.1 ,000 (Rupees One Thousand Only) per Equity Share. Tata Investment Buyback represents 8.17% of the paid-up equity share capital of the Company and is on a proportionate basis under  “Tender Offer” route.

See List of all Forthcoming and Recent Buybacks
Tata Investment Buyback: Updates
  • Tata Investment Buyback Acceptance ratio reported 66%
  • Tata Investment Live Bidding Status
  • Tata Investment Entitlement Ratio 32.83%
  • Tata Investment Buyback Issue Date : 04-02-19:15-02-19
Tata Investment Buyback 2018
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Tata Investment Buyback: A Framework to Estimate Acceptance Ratio

This framework is based on estimation of shareholding of Tata Investment  shareholders  who hold around 250 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  few shares by arbitrage investors.

Based on approximations indicated above and considering a average tendering ratio as many investors in this company may be very long term investors, acceptance ratio for Tata Investment Buyback may fall in the region of 30-45%. Since retail shareholding of Tata Investment Corp is not very high, it may get impacted by any large scale purchase by arbitrage investors which may result in lower acceptance ratio. However in such case price of stock should also move up accordingly before the buyback.

Cross Tabulation of Estimated Returns: Tata Investment 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.

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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 Tata Investment Corp  Ltd.:
  • Tata Investment Corporation Ltd. (TICL) is a non-banking financial company.
  • TIC was promoted by Tata Sons in 1937 and went public in 1959
  • Earlier named the Investment Corporation of India, the company is primarily involved in investing in long-term investments such as equity shares, debt instruments, listed and unlisted, and equity-related securities of companies in a wide range of industries.
  • The sources of income of the Company consist of dividend, interest and profit on sale of investments.
Tata Investment: Summary of Financials,  Stock Price Trend
Parameter Figures
Market Cap (in Rs.  Cr.) 2,045
Earning Per Share (TTM) 25.72
Price To Earnings (P/E) Ratio 16.2
Book Value 129.05
Price To BV 3.23
EBIT Margin (%) 17.22
PAT Margin (%) 12.92
ROCE (%) 28.79
Debt to Equity Ratio 0.01
Tata Investment Buyback price chart

( in Rs. Cr.)

Particulars Sep-18 Jun-18 Mar-18 Dec-17 Sep-17 Jun-17
Total Income 100.6 31.01 58.36 47.02 82.41 25.41
Total Expenditure 5.63 4.6 5.56 3.46 6.66 4.48
PBIDT 94.97 26.41 52.8 43.56 75.75 20.93
Interest 0 0 0 0 0 0
PBDT 94.97 26.41 52.8 43.56 75.75 20.93
Depreciation 0.01 0.02 0.06 0.02 0.02 0.01
Tax 3.8 4.04 10.65 9.09 4.14 2.46
Deferred Tax -0.14 -0.13 0 0 -0.64 0.48
Profit After Tax 91.3 22.48 42.08 34.45 72.23 17.98
Extra-ordinary Items 0 0 0 0 0 0
Profit After Extra-ord item 91.3 22.48 42.08 34.45 72.23 17.98
EPS 16.57 4.08 7.64 6.25 13.11 3.26
Equity 55.1 55.1 55.1 55.1 55.1 55.1
PBIDTM(%) 94.4 85.36 90.5 92.64 91.92 82.63
PBDTM(%) 94.4 85.36 90.5 92.64 91.92 82.63
PATM(%) 90.76 72.66 72.13 73.27 87.65 70.98
Assessment: Tata Investment Buyback
    • Tata Investment invests in a diversified portfolio of quoted and unquoted securities of companies, including Tata Group Companies, primarily from a long term perspective.
    • Change in LTCG law this year may have prompted the company to adopt buyback route to distribute profits.
    • Tata Investment Corporation Limited  reported standalone revenue of Rs101cr in Q2FY19, a growth of 22% yoy. EBITDA for the quarter was up 25% yoy  and  Net profit at Rs. 91 cr  was up 26% yoy.
    • Tata Investment stock has run up considerably after announcement of its intimation to go for a buyback and hence investors should moderate their return expectations accordingly.
    • The Stock may open gap up on Monday due to this announcement.
    • From an arbitrage angle, at present rates and considering good buyback price, Tata Investment Buyback may be a reasonable opportunity for  arbitrage investors depending on the entry price, it may offer in coming days. 
  • 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.

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