Indiamart Intermesh shares have potential to deliver up to 7 per cent return in the next 3-4 months following the share buyback announced by the company, said Axis Securities in its latest note. To recall, Indiamart Intermesh has approved buyback of 12.5 lakh Indiamart Intermesh shares at a price of Rs 4,000 apiece for an aggregate amount not exceeding Rs 500 crore. This buyback will be executed through a tender route and the said offer amounts to 2.04 per cent of the aggregate paid-up share capital of the company.
For small investors, Axis Securities assumed two scenarios. The first is when minimum acceptance ratio (MAR) stands at 2 per cent, where all small investors tender 100 per cent of their shares. In the scenario II, the minimum acceptance ratio is 3.8 per cent when 50 per cent participation is assumed.
As per the Sebi rules, 15 per cent of the total tender offer is reserved for the small shareholder category. In the case of Indiamart Intermesh, these are the investors who would have investments not exceeding Rs 2 lakh as on the record date of the share buyback. The total public holding in Indiamart Intermesh stood at 50.67 per cent, with small shareholder accounting for 7.8 per cent or 48 lakh shares.
A total of 15 per cent of the buyback offer of 12.5 lakh shares comes in at 1.87 lakh shares, which is nearly 4 per cent of the total shares small investors held in the company . Hence, the minimum acceptance ratio for small shareholder would be 4 per cent.
Axis Securities said: "The return expected out of this buyback for the small shareholder category would be 6-7 per cent for the minimum acceptance ratio of 4-8 per cent acceptance (assuming the post buyback share price is 3,300/share based on 37X FY25E P/E)."
Meanwhile, the public holding excluding ‘shareholders not exceeding investment up to Rs 2 lakh’ amounts to 42.8 per cent or 2.6 crore shares. The return earned out of this buyback for the General category would be 5.7-6 per cent for the minimum acceptance ratio of 2-4 per cent acceptance, Axis Securities. This is as it assumes the post buyback share price at Rs 3,300 per share based on 37 times FY25 EPS.
Here it assumed 4 per cent acceptance ratio when only 50 per cent participation by MFs, foreign portfolio investors, the general category shareholders, and 30 per cent participation by promoters is baked into, as this would bring public holding available to tender down to 2.75 crore shares, giving a higher acceptance ratio.
The promoter holding in the company stands at 49.22 per cent or 3 crore shares.