Tech Mahindra had informed on 17-02-19 that the meeting of the Board of Directors of the Company is scheduled on 21-02-19 ,inter alia, to consider and approve proposal for buyback of the fully paid-up equity shares of the Company. Tech Mahindra Buyback (TechM Buyback) as approved by its Board comprises the proposal for buyback by the Company of its own fully paid equity shares of Rs. 5/- each not exceeding 20,585,000 Equity Shares from the equity shareholders at a price of Rs. 950/- per Equity Share for an aggregate amount not exceeding Rs. 1,956 crore. Tech Mahindra Buyback is approximately 2.1% of the paid-up share capital of the Company and is on a proportionate basis under “Tender Offer route”. Record Date for
Tech Mahindra Buyback is 06.03.19.
Tech Mahindra Buyback Updates
- Live Bidding Status
- TechM Buyback opens 25-03 – 5-04-19
Tech Mahindra Buyback
The details are given in the table below.
|MP on the day||802.0|
|Buy Back Price||950|
|MP befo BM||811|
|% Premium on MP||17.14%|
|BuyBack Size- Rs. Cr||1955.58|
|BuyBack Size- Shares||20,585,000|
|Tot No.of shares||981,249,832|
|Equity Capital- cr||491|
|FV of Share in Rs.||5|
|Buy Back Issue date||15-3:05-04-19|
|Shares reserved- Retail||3,087,750|
|Shareholders on RD||4,41,834|
|Shares on RD||29,397,623|
|Actual Aceeptance %||25.90%|
Tech Mahindra Buyback : Estimate of Acceptance Ratio:
This framework is based on estimation of shareholding of Tech Mahindra 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 Shares by Arbitrage investors.
Based on approximations indicated above, the entitlement ratio for Tech Mahindra Buyback Buyback is expected to around 10-15%. Considering a moderate tendering ratio, under normal circumstances Tech Mahindra Buyback could have an acceptance ratio in 20-30% depending on how much new arbitrage investors buy into the stock and more important the tendering ratio by existing investors.
Estimated Returns for Tech Mahindra 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.
|MP Aft Buybk|
|MP aft Buybk|
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.
About Tech Mahindra
- Tech Mahindra, a leading provider of digital transformation, consulting and business re-engineering services and solutions
to various industry verticals and horizontals.
- Tech Mahindra is a US$ 4.9 billion company with 121,840+ professionals across 90 countries with over 935 global customers including Fortune 500 companies.
- Tech Mahindra convergent, digital, design experiences, innovation platforms and reusable assets connect across a number of technologies to deliver tangible business value and experiences to the stakeholders.
- Tech Mahindra is the highest ranked Non-U.S. company in the Forbes Global Digital 100 list (2018) and in the Forbes Fab 50 companies in Asia (2018).
- Tech Mahindra is part of the USD 21 billion Mahindra Group that employs more than 200,000 people in over 100 countries. The Group operates in the key industries that drive economic growth, enjoying a leadership position in tractors, utility vehicles, after-market, information technology and vacation ownership.
- Anand Mahindra is the Chairman of Tech Mahindra and the company is headquartered at Pune and has its registered office in Mumbai.
Tech Mahindra : Price Trend, Summary of Financials
|Market Cap in Rs. Cr||79,731|
|Revenue FY18 in cr||30,773|
|CMP in Rs.||812.4|
|Price / Earning (PE)||18.17|
|Price / BV||3.84|
|Sales 3 yr CAGR||10.80%|
|Debt / Equity Ratio||0|
Assessment: Tech Mahindra Buyback Buyback
- Since no Board approval is required and RD has been fixed, the Tech Mahindra Buyback proposal should move fast though not as fast as PSU stocks.
- Tech Mahindra Q3FY19 results were good and share was rallying continuously ever since these results. Revenue in Q3FY19 stood at USD 1,261mn up 3.5% QoQ and up 4.3% on constant currency basis.
- Management is of the view that spending related to 5G roll-out in USA will provide further thrust to Telecom growth
- Tech Mahindra is virtually debt free & holds good cash reserves.
- Cash rich Indian IT companies have been returning surplus cash on their books to shareholders by way of buybacks and other than Mphasis other Buybacks have proven good for arbitrage investors too.
- Tech Mahindra has been maintaining a healthy dividend payout of ~32%.
- Tech Mahindra Buyback presents a moderate returns opportunity and I intend to add the stock on any dips for participating in Buyback.
- With no other ongoing opportunity many arbitrage investors may enter Tech Mahindra Buyback which may bring down the tendering ratio.
- Forthcoming elections may lead to volatile movements in stocks and there is systematic risk to all stocks on account on this. There is a also a risk if tensions with Pakistan escalate.
- National Association of Software and Services Companies (Nasscom), has decided to discontinue the practice of giving out revenue growth forecast for the Indian IT industry & will henceforth offer guidance only. Its guidance for FY20 is “cautiously optimistic” given the increasing global macroeconomic headwinds, protectionist tendencies and the lack of talent for new technologies. As a results IT stocks today were under some pressure.
- Tech Mahindra is in F&O which will lend some stability to its price post buyback.
- 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.