Greaves Cotton Limited Buyback Offer 2019

Greaves Cotton Limited, a diversified engineering company that is a leading manufacturer and marketer of diesel engines, petrol engines, generator sets, pump sets, and construction equipment. With a 160-year-old engineering legacy spreading across India and a growing global presence, we take pride in our quality products and services.

(i) Agri Equipment: Manufactures and market agri equipment and is a market leader in petrol/ kerosene engines. The product range includes such as lightweight petrol, diesel engines, pump sets, power tillers, reapers, and mini-farming equipment, etc. The manufacturing facility is located at Gummidipondi (TN).

(ii) Automotive: Manufactures light diesel engines for automotive application (4.4 to 25 HP) for three and four wheeler small commercial vehicles. Greaves is the market leader in single and twin cylinder diesel engine. The manufacturing facility is located at Aurangabad and Ranipet (TN).

(iii) Auxiliary Power and Industrial Engine: Manufactures diesel and gas gensets in the range of 50-500 KVA, engines for marine, fire fighting pump sets, mining, rail cars, etc. The manufacturing facility is located at Pune. The diesel engines range from 1.4 to 750 HP range with an option for CNG/LPG fuel.

(iv) Construction Equipment: Manufacture range of compaction, concreting and earthmoving equipment. The manufacturing facility is located at Gummidipondi (TN).

Buy Back Offer Deal:

Buyback Type: Tender Offer
Buyback Record Date: Jul 12 2019
Buyback Opening Date: Oct 18 2019
Buyback Closing Date: Nov 01 2019
Buyback Offer Amount: ₹ 240 Cr
Date of Board Meeting approving the proposal: May 02 2019
Date of Public Announcement: May 02 2019
Buyback Offer Size: 5.16%
Buyback Number of Shares: 13714286
Price Type: Tender Offer
FV: 2
Buyback Price: ₹ 175 Per Equity Share

Details of Buyback:

(i) The Board of Directors of Greaves Cotton Limited at its meeting held on 2nd May 2019, has approved a proposal to buy back up to 1 ,37, 14,286 Equity Shares of the Company which is 5.6% of the total paid-up equity share capital (the "Buyback"), at a tender price of Rs. 175 for an aggregate amount, not exceeding Rs. 240 Crores (Rupees Two Forty Crores only). (ii)  The Buyback is subject to necessary permissions, sanctions, approval of the members by means of a special resolution through a postal ballot.

Salient financial parameters:

Particulars(Cr) Mar-18 Mar-17 Mar-16
Revenue 1,837.39 1,684.45 1,660.73
Expenses 1,589.97 1,438.30 1,394.00
Profit/Loss 202.62 180.63 198.78
EBITDA Margins 16.55% 17.16% 18.06%
PAT Margins 11.03% 10.72% 11.97%
EPS 8.28 7.4 8.21
IZ VIEW 1. The company has shown a 10% growth in the last 3 years in terms of Revenue and timid growth of 2% in PAT. 2. The EBITDA Margins are going southwards in the last 3 years. 3. The Company's share price in the last 4 years( July-15 to May-19) is toggling between 130 to 150 levels. So it has made very less money for investors in terms of share appreciation. However, the company is continuously giving dividends. From (July-15 to May-19), the company has given Rs. 21.6 dividends per share to its shareholders. So by considering dividend the total CAGR return in the last 4 years are 10.63%. 4.  The company caters to Auto Sector and the same is going through a very tough time. Auto Numbers for all the leading companies are very disappointing. So yes, tough times ahead for Greaves Cotton as well. 5.  The share is currently trading at P/E of 21 on the basis of FY18-19 Financials.

How to Participate in buyback?

1. Firstly to be eligible for the buyback the investor should have shares of Greaves Cotton Limited Buyback Offer 2019 in demat or physical form as on record date. [ 12.07.2019 ]. 2. Once you have shares in demat, you can participate in the buyback process which is opening from [ 18.10.2019 to 01.11.2019 ] by selling your shares through your broker on NSE or BSE. 3. Then on [ 13.11.2019 ], 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 1142 Shares at CMP of Rs. 148 [2,00,000/175 =1142)
Acceptance Ratio 33% 50% 75% 100%
Amount Invested in Buyback 1,69,142 1,69,142 1,69,142 1,69,142
No. of Shares buyback 376 571 856 1142
BuyBack Profit 10,152 15,417 23,112 30,834
Profit 6% 9.11% 13.6% 18.2%

Recommendation:

Review and Recommendation of Greaves Cotton Limited Buyback Offer 2019 by IZ team is: 2/10 Fair: 1-5 Good: 5-7 Excellent: 7-10 [ Entitlement 5-10%]

    I have received contract note from my broker for 55 shares against tendered 100 shares and entitlement of 37/310.

    a) BSE

    Under Individual Category total ~92 lakh shares are tendered.

    b) NSE

    Under Individual Category total ~11 lakh shares are tendered.

    So total shares tendered under the Individual category is ~1 cr.

    If we assume 50% shares tendered by Retail, then 50 Lakh is the figure.

    Retail Quota is ~ 20 lakh.

    So we can assume Retail AR would be close to 40%.

      From where did you get the figures for Individual Category? BSE website gives only the total which is 311.42% subscription. If you have any source link please share.

        Yes, you are correct Ranganathan Jii. I am just guessing from the trend.

        My working is slightly different. The retail shareholding is 6.55% of Paid Up Capital. Assuming that same %age of total bid qty (40484919), the bids under retail category is likely to be 2651762, and hence I expect AR of around 73%.

    Promoters are not participating in buyback. This is a good news since actual buyback ratio will be much more than 12%. Offer all the share u have on record date to get maximum benefits.

        Whenever the company announces buyback at that time it mentions whether promoters are participating or not.

    ER seems to be 12%
    We can expect AR around 15 to 20%

    Based on experience on other buybacks

    Got letter for 45/375 and this comes to 12% ER

    Hi, Just got email regarding this buyback. Is it really worth to participate on this buyback at current market condition. Bid price Rs.175/sh is hight than current market price. Then how it will work? Im not sure about this buyback. Folks, Please help me to know more about this please

      Did you holding shares on record date? If yes, then at what price did you buy it?

    Finally…buyback dates announced…been an extremely long wait…Oct 18 buyback opens…

    Is greaves buyback also expected from buyback tax after latest announcement by Nirmala mam ? Any idea since it says the companies that made public announcement before July 5 will be exempted

      Greaves Board resolution says. Rs………….. excluding taxes including buy back tax interalia………..
      This means BB Tax will be born by company.
      This is my understanding. MW Sir can throw more light on this.

      no buyback taxes for the company who have announced before 5th July and same apply for Greeves cotton.

    I had 310 shares as on record date which I sold today. With a dip, if it happens, I will purchase some shares near to my entitlement in BB. I expect that both ER and AR will be nearly same. So I hope purchase 100 shres only. Pl. guide me as to what quantity should I purchase?

    The company is not reluctant to push Buyback either they will wait another quarter for buyback or most probably SEBI will give permit them to Cancel Buyback as Tax laws have changed.

    BSE buyback is open now. Hopefully this will also open soon…. Anyway company future looks good. so not worried about investments.

    There has not been any update on buyback recently…even their audited results for q1 is done without a word about the buyback

    *Greaves cotton buyback* The Company has received interim observations from SEBI in regard to the draft letter of offer filed by the Company on July 4, 2019 and is in the process of addressing them.

    In light of the proposal to introduce a tax on distributed income by listed companies undertaking buyback of shares, vide the Finance (No. 2) Bill 2019 (introduced in Parliament on July 5, 2019), it is hereby submitted that the Company has filed before the Ministry of Finance and SEBI seeking clarifications and certain relaxations with respect to the Buyback.

    You have given rating as 2 which is considered poor
    Can you do other analysis and present in comment section as u usually do

    Greaves Cotton is Market Leader in 3W Diesel Engine which contributes about half its revenue.

    what would be the acceptance ratio of greaves cotton buy back for the retail share holders