Bajaj Auto Share Buyback: Bajaj Auto has announced February 29 as the record date for a proposed buyback plan amounting to Rs 4,000 crore, at Rs 10,000 per share. Shares of the leading player in the Indian 2-wheeler and 3-wheeler vehicle industry has more than doubled in the last one year and are trading near its all-time high price of Rs 8,650.
“…the buyback committee constituted by the Board of Directors has fixed Thursday, February 29, 2024, as the record date for the purpose of determining the entitlement and the names of the equity shareholders who shall be eligible to participate in the buyback,” according to a stock exchange filing.
Back on January 9, 2024, the company’s board approved the proposal for buyback of up to 4 million shares of face value of ₹10 each at a price of ₹10,000 per share for a total consideration not exceeding ₹4,000 crore.
This will be Bajaj Auto’s second share buyback in two years. With more than a week before the much-anticipated stock buyback hits the Street, can investors use this opportunity to gain from the corporate action?
The buyback price is 18% higher than Tuesday’s closing price of Rs 8,462 on BSE.
What Should Investors Do?
“We recommend retail shareholders to offer all the shares for the buyback since there is a decent arbitrage opportunity. There is a high probability of acceptance ratio coming on the higher side given that only 1.87 lakh shareholders are holding nominal share capital up to Rs 2 lakh,” said Amar Nandu, Research Analyst – Samco Securities.
The promoter holding is expected to exceed 56% post buyback.
“On an immediate basis, the Bajaj Auto stock should react positively,” said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research. In his base case, Pagaria estimated general category (institutional) acceptance at 1.3 per cent and a potential yield of 55-60 basis points at current market price.
For retail, his initial calculations suggest acceptance in the range of 4 per cent to 10 per cent. Pagaria said if promoters opt out, which he says is unlikely, general acceptance might rise to 3 per cent, with retail acceptance unchanged. While specific dates for the buyback remain pending, Nuvama Alternative Research said completion is likely within 3-3.5 months from now.
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