Bajaj Auto shares jump 6% on share buyback; what analysts say on acceptance ratio, other details

Shares of Bajaj Auto Ltd climbed 6 per cent in Tuesday's trade after the company board announced its Rs 4,000 crore share buyback plan. The stock rose 6.21 per cent to hit a high of Rs 7,420, as the buyback price at Rs 10,000 crore  was at 43.14 per cent premium to the stock's Monday's closing price of Rs 6,985.70. The share buyback, Bajaj Auto said, would be carried through the tender offer route and on a proportionate basis. 

The Nifty Auto index was up 200 point, or 1.09 per cent, at 18,549.95. "The attractive buy back offer from Bajaj Auto will give support to the Nifty Auto Index," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

The two-wheeler maker said it would buy back up to 4,000,000 fully paid-up shares of face value of Rs 10 each, which would represent 1.41 per cent of the total number of equity shares of the company.  Analysts largely expect promoters to participate in the buyback issue and said they would potentially receive about Rs 2,200 crore. While specific dates for the share buyback are still to be out, analysts said the completion is likely within the next 3-3.5 months.

The previous buyback by Bajaj Auto was worth Rs 2500 crore and it was done via open market through stock exchange mechanism at the rate Rs 4,600 per share. Anlaysts were largely expecting Rs 7,800-8000 range for the share buyback. 

The Bajaj Auto stock should react positively on an immediate basis, Nuvama Alternative & Quantitative Research's head Abhilash Pagaria said in a note. Pagaria expects the general category (institutional) acceptance ratio to come in at 1.3 per cent and he sees a potential yield of 55-60 basis points at current market price.

For retail investors, analysts 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.

In a note on January 2, Sharekhan said Bajaj Auto is witnessing healthy retail trends even after strong festive season lead its structural play in above 125 CC segment. The brokerage felt that Bajaj Auto strongly established its brand – Chetak in the EV market and harnessed a 12 per cent market share,  given it was a late entrant in the EV segment. 

"Its brand-focused play has been paying healthy dividend as Triumph 400 is cornering 15-20% market share in some city specific market as Triumph 400 has yet to be available on pan-India basis. The shipments have been delayed to some of the parts in Latin America and Africa in December 2023 due to Red Sea issue but has not materially affected its performance so far. The management has indicated that it has not lost volumes due to ocean transportation issue and assumes that the disruptions would not last long," the brokerage said.

Sharekhan said the refreshed versions of Pulsar range of products are performing well an Bajaj Auto is planning for number of new launches in coming months. 

Also read:bajaj-auto-share-buyback-what-investors-need-to-know-about-rs-4000-crore-offer-412376-2024-01-09"> Bajaj Auto share buyback: What retail investors need to know about Rs 4,000 crore offer

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