Bajaj Auto share buyback: What retail investors need to know about Rs 4,000 crore offer

The board of Bajaj Auto Ltd has announced a Rs 4,000 crore share buyback plan at a price of Rs 10,000 per share through the tender offer route and on a proportionate basis. On BSE, Bajaj Auto shares closed at Rs 6,985.70 on Monday. The Bajaj Auto's proposed buyback price suggests a 43.14 per cent premium over this price.

In a filing to BSE, the two-wheeler maker said its board has approved the proposal for buy back of up to 4,000,000 fully paid-up equity shares of face value of Rs 10 each by Bajaj Auto, representing 1.41 per cent of the total number of equity shares of the company at a price of Rs 10,000 per share payable in cash for a total consideration not exceeding Rs 4,000 crore.

"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  a completion is likely within 3-3.5 months from now.  

The share buyback represented 16.33 per cent of the total paid-up equity share capital and 14.49 per cent of free reserves (including securities premium account) as per the audited standalone financial statements and audited consolidated financial statements of Bajaj Auto for the financial year ended on March 31, 2023, respectively. 

A total of 64 promoter and promoter group shareholders owned 155,580,309 shares or 54.94 per cent stake in Bajaj Auto so far. FPI owned 14.72 per cent stake in Bajaj Auto while mutual funds (5.35 per cent) and insurance companies (3.21 per cent) also owned significant stake in the maker of two-wheelers and three-wheelers. 

"In terms of Regulation 5(via) of the Buyback Regulations, the Board / Buyback committee may, till one working day prior to the record date, increase the buyback price and decrease the number of Equity Shares proposed to be bought back, such that there is no change in the buyback Size," Bajaj Auto said.

The Bajaj Auto board constituted a Buyback Committee and has delegated the power to do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary, expedient or proper in connection with the buyback.

"The buyback is subject to approval of the shareholders by means of a special resolution through a postal ballot. The public announcement and letter of offer setting out the process, timelines and other requisite details will be released in due course in accordance with the Buyback Regulations," Bajaj Auto said.

 

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