When Is The Next Buyback Offer Likely To Be? - vrk100 - 22Mar2023

When Is The Next Buyback Offer Likely To Be?

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(This is for information purposes only. This should not be construed as a recommendation or investment advice. Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)

 

Emami Limited, a listed company in India, on 21Mar2023 announced that its board of directors would meet on 24Mar2023 to consider a buyback proposal for its fully paid-up equity shares.

The date of announcement (that is, 21Mar2023) is significant because it's exactly one year from the date of closure of its 2022 buyback, which started on 09Feb2022 and closed on 21Mar2022. It may be mentioned the 2022 buyback offer was through 'open market via stock exchanges' route.

 

As per the norms of India's capital market regulator, Securities and Exchange Board of India (SEBI), there should be a minimum gap of one year between two buyback proposals.

 

 

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(I have, over the years, analysed a number of companies' buyback offers. You can check them in the related blogs section below)

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Related Blogs:

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Not all companies do buyback offers immediately after one year from the date of closure of previous buybacks. For example, FDC Limited did a buyback in 2020, which closed on 29Sep2020. But it took about 15 months from the closure of 2020 buyback to consider the next buyback. FDC made the next buyback announcement on 04Feb2022.

 

Companies consider certain factors before making any buyback offers. 

 

Key factors that go into buyback consideration include, the amount of cash surplus available after any capital expenditure, available free reserves, SEBI regulations for buyback, the capital allocation policy of the company, the company's dividend policy, attractiveness of the share price relative to past valuations and others.

Tata Consultancy Services Ltd (TCS) did a buyback last year -- the buyback opened 09Mar2022 and closed on 23Mar2022. Since 2017, the company made four buybacks -- all through 'tender offer' route.

 

It'll be interesting to watch what TCS management would do on or after 23Mar2023 (one year from closure of 2022 buyback) about potential buyback. TCS regularly buys back its equity shares, because it generates healthy free cash flows (free cash flow is operating cash flow after capital expenditure, if any).

 

The following is a representative list of companies in the listed space that are likely to be eligible for the next buyback offer, provided the companies deem it fit to distribute their cash surplus via buyback offers >

 

 

To give an example: As shown in above table, MOIL Limited closed its previous buyback on 10Feb2022. So, the company is not barred from offering another buyback on or after 10Feb2023 (buyback eligibility date for next buyback -- one year from closure of previous buyback).

But the company has, in the past six weeks, not made any announcement regarding buyback. 

Let us cite another example: KPR Mill Ltd completed its 2022 buyback on 07Apr2022. So, it cannot make the next buyback offer before 07Apr2023 (one year from closure of previous buyback). Depending on the management's comfort on cash position and other considerations mentioned above, KPR Mill may, in theory, consider a buyback on or after 07Apr2023.

 

To Sum Up

Investors have to consider various factors as to whether a stock is attractively priced before participating in buyback offers. One should not base their decisions solely on potential buyback offers. It's naive to buy stocks based solely on a single metric -- like buyback offers or others.

 

It would be useful to watch the buyback closure dates and the prospective date on which a company is likely to be eligible for the next buyback (as shown in the representative list above).

 

Investors need to see whether the company routinely uses buybacks for distribution of their cash surplus to equity shareholders. Stock valuation is also a key metric for investors before deciding on buyback offers. Investors also need to see whether the promoters are participating in the buyback offers.

 

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References:

Tweet 22Mar2023 on buybacks

Tweet  18Mar2020 on buyback list

BSE weblink to search for past buyback offers (only tender offers - dropdown menu)

SEBI weblink for past buyback offers (both tender and open market offers)

Screener.in weblink (after login) for past buyback offers

BSE weblink for Live Public insues (including buybacks - both tender and open market offers)

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Ajanta Pharma Buyback Offer 2023

 

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Disclosure:  I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets. 

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https://ramakrishnavadlamudi.blogspot.com/

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