The ₹4,000-crore share buyback programme of automotive manufacturer Bajaj Auto will open on March 6 under which the Bajaj Group company will buy back 40 lakh shares of face value of ₹10 each, representing approximately 1.41% of total outstanding shares, at a price of ₹10,000 per share. The buyback plan was announced in January 2024 at a price of ₹10,000 per share through the tender offer route and on a proportionate basis.
The buyback, which will remain open for tendering till March 13, is at a significant premium to the current market levels of ₹8,299.60 on NSE. The stock price was trading 1.55% higher at ₹8,334.90 during today's afternoon trade.
The last date for verification of tender forms by the registrar is being fixed as March 18 while bids will be settled on the bourses by March 20. The equity shares bought back will be extinguished by March 26.
Bajaj Auto share buyback entitlement ratio
Besides the tender route buyback timelines, Bajaj Auto has announced acceptance ratio, with the final entitlement ratio for general, institutional acceptance.
For the general and institutional categories, Bajaj Auto will buyback one equity share for every 82 equity shares held on the record date. This translates to a 1.22% acceptance rate. Thus, a minimum of 1.22% of shares will be accepted, with the final acceptance potentially slightly higher on a case-by-case basis, said Abhilash Pagaria of Nuvama Alternative & Quantitative Research.
For retail investors, which includes individual shareholders with investments up to ₹2 lakh, the share entitlement ratio has been fixed at seven equity shares for every 27 equity shares held on the record date, resulting in a 25.9% acceptance rate.
Therefore, a minimum of 26% of shares will be accepted, with the final acceptance likely to be closer to 26-30%, Nuvama said.
The record date for Bajaj Auto buyback was February 29.
Should you tender shares?
Although the auto sector and quite a few names in it have seen a stellar rally for the past few months, it makes sense to tender into the buyback price of ₹10,000 for Bajaj Auto on account of two reasons, as per Rahul Ghose, CEO, Hedged—
1) The current P.E of the markets are beyond 22, indicating that we are in an expensive territory and even if we were to see a rally of another 800 or 1000 points on the Index, the buyback price which is 20% away is significantly higher and therefore more lucrative.
2) Even though the stock is fundamentally strong with excellent results in the last few quarters with the company hitting its highest net sales recently, the momentum indicators currently are showing that the upside is limited and the ferocity of the trend can slow down from here. A time correction is definitely on the cards even though a price correction might not be very severe.
Taking both these factors into account, Ghose suggested investors to tender the shares in the buyback or exit the stock between 8500-8700 levels is considered the more prudent approach.
'See ₹12,000 as fair value for Bajaj Auto stock'
In an exclusive interaction with CNBC-TV18 today, Bajaj Auto Managing Director Rajiv Bajaj said that he sees the fair value of Bajaj Auto's stock at ₹12,000. "I believe ₹12,000 is the fair value for the Bajaj Auto stock," Bajaj said, adding that the company is firing on all six business cylinders.
Bajaj spoke to CNBC-TV18 ahead of the company's share buyback, which opens tomorrow. He mentioned that the buyback has received a tremendous response.
Bajaj Auto shares have rallied 123% in the last one year. The stock was the second-best performing stock on the Nifty 50 index last year, with gains of 88%.
First Published: Mar 5, 2024 1:26 PM IST
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