Bajaj Auto share buyback: Why the company is offering top dollar for your stock
The bold move to price the Bajaj Auto share buyback at a 43% premium, at ₹10,000 apiece, is a reflection of the company's confidence in its strong performance and optimistic business outlook, Chief Financial Officer, Dinesh Thapar told CNBC-TV18.
Bajaj Auto's decision to price its ₹4,000 crore buyback plan at ₹10,000 a share reflects a strategic deviation from typical market trends, where premiums usually range between 25-30% over the prevailing price. This bold move, involving the acquisition of about four million shares, is not just a financial decision but a reflection of the company's confidence in its strong performance and optimistic business outlook, the company's Chief Financial Officer, Dinesh Thapar told CNBC-TV18.
Bajaj Auto share buyback price of ₹10,000 apiece reflects a substantial premium of 43% over the last closing price of ₹6,985.10. The proposed buyback translates to about 16% of the company's paid up share capital and free reserves, and subject shareholder approval. The process is expected to be conclude by mid-February.
According to brokerage firm UBS, Bajaj Auto's buyback price is steep, though the promoters will participate in the buyback.
Based on UBS' calculations, promoters of Bajaj Auto may receive a sum of ₹2,200 crore through the buyback.
"...the idea was to really use this as an opportunity to reflect on our performance over this last little while, which has really been quite compelling and really outperforming in terms of the broader industry," Thapar said.
This perspective stems from Bajaj Auto's resilience in the two-wheeler segment, overcoming past challenges and now witnessing a resurgence in market demand and affordability. Bajaj Auto's strategic focus on segments like the 125cc motorcycles has paid off, with the company gaining market share and attaining a leading position. The addition of Triumph to the portfolio is expected to further boost the premium motorcycle business, doubling it in the short term and expanding export opportunities. The three-wheelers has also been revamped, opening new avenues for growth and innovation, Thapar noted.
Also Read | Bajaj Auto hits all-time high on share buyback; what investors need to know about acceptance ratio
Promoter and promoter group entities currently hold 54.94% stake in Bajaj Auto, and foreign institutional investors hold 14.72%. While promoters are also expected to participate in the proposed buyback, the expectation post-buyback is for their shareholding to either stay the same or marginally increase.
This, Thapar explained, is due to the attractive pricing of the buyback, encouraging full shareholder participation, and a 15% reservation for small shareholders. "...the math on the post-buyback percentage, suggests the promoter holding assuming everyone tenders in line with their entitlement should be at about same levels or a tad higher."
Shares of Bajaj Auto have gained nearly 16% over the past month and more than 99% in the past year. On January 9, the stock hit an all-time high of ₹7,399 on the NSE.
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First Published: Jan 10, 2024 10:12 AM IST
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