FDC Buyback 2019

(i) A young visionary, Anand Chandavarkar, in the backdrop of India’s independence struggle, dreamed of building a world-class company in 1936. His vision of freedom was to create, to build, and to industrialize, in order to make the nation self-reliant in healthcare. In 1940, this partnership firm was incorporated as a private limited company – Fairdeal Corporation (Private) Limited and in 1986 its name was changed to FDC Private Limited. Thereafter, FDC became a public limited company and was listed on the Bombay and National Stock Exchanges of India in 1996.

(ii) Today, FDC carries forward the flaming spirit of its first dream, achieving accreditations from the US-FDA, UK-MHRA, MCC-RSA, and the UAE, to cite a few.

FDC is a forerunner in manufacturing and marketing of Oral Rehydration Salts (ORS) and Ophthalmics.

FDC has also set-up globally approved, multi-location manufacturing facilities for Active Pharmaceuticals Ingredients (APIs) as well as Finished Dosage Forms. These facilities are located at Roha, Waluj and Sinnar in Maharashtra, Verna in Goa and Baddi in Himachal Pradesh.

FDC markets more than 300 products in India and exports many of these to over 50 countries.

Products of the Company in Glance

Buy Back Offer Deal:

Buyback Type: Tender Offer
Buyback Record Date: Jun 07 2019
Buyback Offer Amount: ₹ 120.05 Cr
Date of Board Meeting approving the proposal: May 24 2019
Date of Public Announcement: May 24 2019
Buyback Offer Size: <10%
Buyback Number of Shares: 34,30,000
Price Type: Tender Offer
FV: 1
Buyback Price: ₹ 350 Per Equity Share

Details of Buyback:

The company has Approved the buyback of its own fully paid up Equity Shares of Re. 1/- each ("Equity Shares") from the equity shareholders of the Company, not exceeding 34,30,000 fully paid-up Equity Shares at a price of Rs. 350/- per equity share for an aggregate amount not exceeding Rs. 120.05 Crores (being less than 10% of the Paid Up Capital and free reserves as on March 31, 2019) from the existing equity shareholders of the Company on a proportionate basis through the "Tender Offer" route. As the size of the buyback is less than 10% of Paid-up Capital and Free reserves so shareholders approval is not required. It means the buyback can be completed in a short period of time. Decided June 07, 2019, Friday, as the Record Date for the purpose of determining the names of the shareholders who shall be entitled to tender shares under the Buyback Offer.

Salient financial parameters:

Particulars( in Cr) 2018 2017 2016 2015
Revenue 1,070.21 1,046.02 997.44 877.65
Other Income 51.25 49.65 32.51 44.36
Total Income 1,121.46 1,095.67 1,029.96 922
Expense 852.51 811.36 775.28 680.9
Net Profit 168.31 187.07 156.81 145.91
OPM % 25.13 27.18 25.53 27.47
NPM % 15.73 17.88 15.72 16.62
Equity 17.52 17.86 17.78 17.78
EPS 9.47 10.52 8.82 8.2
Financial Performance overview in 2019 1. The company has shown <1% Revenue growth YoY. 2. The company has shown <1% PAT growth YoY. 3. The EPS for FY19 stands at 9.84 as compared to 9.47 last year. We can conclude that there is no growth in the company in the last year. Maybe to reward investors the company has come up with buyback.

How to Participate in buyback?

1. Firstly to be eligible for the buyback the investor should have shares of FDC Limited Buyback Offer 2019 in demat or physical form as on record date. [ 07.06.2019 ]. 2. Once you have shares in demat, you can participate in the buyback process which is opening from Not Announced Yet ] by selling your shares through your broker on NSE or BSE. 3. Then on Not Announced Yet ], the payment will be given to you for accepted shares and unaccepted shares will be returned to your demat account.

Profit from the buyback on the bases of acceptance Ratio:

Buy 571 Shares at CMP of Rs. 198 [2,00,000/350=571)
Acceptance Ratio 33% 50% 75% 100%
Amount Invested in Buyback 1,13,142 1,13,142 1,13,142 1,13,142
No. of Shares buyback 188 285 428 571
BuyBack Profit 28,556 43,320 65,056 86,792
Profit 25.2% 38.2% 57.4% 76%

Recommendation:

Review and Recommendation of FDC Limited Buyback 2019 by IZ team is: 4/10 Fair: 1-5 Good: 5-7 Excellent: 7-10 [ Arbitrage of 76% is available from the Current Market Price of 198 which is quite good. The company did the same price and same size buyback last year and the AR for Retail was around 13% only. So do not accept the blockbuster AR this year as well, as the size of the buyback is small. The big positive is record date has been announced and the buyback may be completed in one month similar to last year. So good upside may be expected in the short term]

    @market wizard please suggest on what rate of share is small retail investor is considered..is it the buyback price, avg rate at which shares are bought or closing price of share on record date

    If your broker is zerodha then you ll not eligible for buyback if you sold on 6th Jun. I.e., ex date. Even I was shocked. I sold for a loss and I don’t even get the benefit of buyback.

    @market wizard…i did a big mistake in my basic calculations. With buyback proce of 350 my holding on record date is more than 2lacs. I thought that on cmp the invetor will be decided as small investor or big. So i wont qualify for small retail investor. Can you suggest what will be the acceptance ratio for holder more than 2l at biyback proce of 350. On my average buy price my holding is 190000.

      Share closing price on record date * nos of shares held if is below 2 lacs than you are considered as retail

        But as per the calculation done by market wizard on all shares for buyback the buyback price is considered.

          You will get to know after you receive email. Till than relax, whatever i said is correct from my previous experience

    I bought 500 shares of FDC on 4th June and sold them all on Ex date 6th June. Will I be eligible for buyback if I buy shares when the tender window opens?

    I sold the FDC shares yesterday (6th Jun), will my shares still be considered for BB?

    I am planning to sell half of the shares tomorrowi.e. on record date because I think once tender is open the rate will be higher then the rate of shares on record date.
    so assuming I have 100 shares on ex-date and I sell 50 shares on record date and assuming the company has acceptance ratio of 50%. So Can I tender all the 50 shares that I hold. Also, in case acceptance ratio is more than 50% I will buy the remaining shares and if it is less then 50% then I will share theexcess shares once tender is open.
    Can members suggest whether this approach is good to avoid loses.

        Market wizard ji….pls suggest whether this approach is right or not…i have sold half of my shares and i will either buy or sell remaining shares based on acceptance ratio when tender is open. So in case acceptance ratio is 50% so can i tender all that i am holding today

          1. Let us suppose you were holding 100 shares on the Record date.

          2. After the record date, you have sold 50 shares.

          3. In case AR is 50%, You can either buy 50 more shares from the Market again and tender all 100 shares. In this case, 50 nos. of the shares will be accepted.

          4. Or even if you don’t buy anything and tender only 50. In this case, also 50 no of the shares will be accepted.

      Please clarify my doubt..
      I bought shares of FDC on 03/06/19. If I sell these shares on 10/06/19 and buy the eligible shares after the announcement by the company, will I still be allowed to participate in buyback?
      Thanks in Advance

    I wish to buy 10 shares now and sell it back to company during buyback…..can I sell all my shares or only few will be accepted. If I tender it as soon as buyback starts only…will all 10 shares be accepted for buy back.

    I wish to buy 10 shares and sell it in buy back. Will I be able to sell all my shares or only part of it…or can I apply it on 1st day so the it’s taken into account to buy it

    Can be bought at CMP with a strict stop loss of 185. 6th June is the Ex-date.

      Thanks Market Wizard. I bought 142 shares @197 price. I plan to sell on record date and then buy eligible number of shares once tender is open. Requesting your suggestion on this.

      I bought 88 FDC shares on 29th May at 195. If I sell them on 6th Jun will I get the benefit of buyback. Thanks in advance market wizard ji.

    Last year when they announce buyback price is around 270.

    This year 190

    Please suggest
    Apply or not

    It can easily give 10% return in the short term. Do not play for buyback as issue size is very small and AR won’t be good.

    Last year also promoters have participated in the buyback and we can accept the same this year also.

    The company is not growing much, so to reward the investor the company is doing a buyback every year.

    Last year the size and price was the same as this time

    The Board of Directors of FDC Limited in their meeting held on February 07, 2018 had given their approval for Buy Back of the Company’s fully paid-up equity shares of Re. 1 each from the Tender offer through Stock Exchange route, of up to 3,430,000 fully paid up equity shares of the face value of. 1 each of the Company at a price of Rs. 350/- (Rupees Three Hundred Fifty only) per Share payable in cash for an aggregate Buyback consideration not exceeding Rs. 120.05 Crores

    Acceptance Ratio last year

    Reserved category for Small = 64( By Mistake initially I showed 13%. I overlooked the figures. )
    A general category for = 12%( By Mistake initially I showed 1.67%. I overlooked the figures. )

    Please check it here https://d2un9pqbzgw43g.cloudfront.net/main/FDC-Buyback-2018.png

    Last year the buyback was announced on 09.02.2018 with Record date on 27.02.2018. The buyback was opened on Monday, March 12, 2018, and closed on Friday, March 23, 2018. So within one month, they have finished the buyback.

      IS AR number correct. the Post Buyback announcement has very different number from what you have mentioned.

          subscription was 1.55 times which makes close to 67% acceptance. Unlike HEG there were not many who subscribed so minimal chance of single share acceptance. I dont have the actual acceptance data so trying to understand where i am going wrong.

            Yes, sorry I overlooked a figure in my calculation. You are right the Retail AR was 64%. I have corrected it.

    Buyback route —————— Tender offer
    Total buyback amount ——– Rs. 120.05 Crores

    Buyback price ——————- Rs. 350/-

    Total buyback shares ——— 34,30,000

    Record date ——————– June 07, 2019, Friday

    FDC Limited has Net Worth of 1276 Cr as on March 2018. Maximum size of the buyback as per SEBI is 25%.

    Pros:

    (i) The company is virtually debt free.

    (ii) The Current ratio is 3.72( Anything above 2 is quite comfortable)

    Cons:

    (i) The Revenue growth in the last 3 years is mere 4.98%.

    (ii) Having inconsistency in Bottomline in the last 3 years.