Jagran Prakashan Buyback offer 2018 (Completed)
On 17/04/18, Jagran Prakashan indicated its intent to go for a share Buyback. The stock was ruling at Rs. 167.5.
on 26/04/18, the Board meeting decided for a tender route for buyback of 1.5 Crore equity shares of Face Value of INR 2, amounting to Rs. 292.5 Crore. The Buyback price was fixed at Rs. 195 which was at 18.7% premium to prevailing price on the day of Board meeting.
The record date for Jagran Prakashan Buyback was fixed at 15/6/2018. The scrip ruled at 159.35 a day before the RD having touched a high of Rs. 174.45 in the intervening period. After the Record date the scrip fell to 146.5.
The Jagran Prakashan Buyback opened from July 10, 2018 to July 23, 2018
The Shareholders entitlement indicated in the buyback letter was 20%. This led to further fall in share price which came to about Rs. 138.3
Finally in the Retail category, buyback bids were received from 12809 investors for 7,134,786 shares against the Retail portion of 2,250,000 resulting in 317% oversubscription of the retail. Thus the buyback acceptance ratio worked out to be 30.47%.
It is estimated that about 6000 new short term investors may have bought Jagran Prakashan shares to almost their full capacity to participate in the Jagran Prakashan Buyback. This alone was sufficient to exceed the buyback quota by at least 1.5 times. This coupled with a already existing reasonable retail base and increased participation of existing investors in the buyback offer and also tendency to tender the shares due to unfavorable headwinds for midcaps in the bourses, led to substantial tendering of shares.
The investors for instance who bought the maximum permissible scrips peritted in retail category (1025 shates) for a consideration of Rs. ~1.69 Lac , finally ended up realizing Rs. ~ 1.46 Lac as a combined result of Buyback of accepted shares at Rs. 195 and sale of remaining shares on receipt at market price. Thus such investor ended with a loss of Rs. 23,000 which amounts to absolute loss of 13.6% in a three month period.
The consequential damage to Jagran Prakashan share from this Jagran Prakashan Buyback buyback has been tremendous. It used to rule at 160-170 levels even before the buyback. Even an inline Q1Fy19 results announced after the buyback have not been able to bring a bounce in the share and the scrip continues to be valued rather poorly.
Above Jagran Prakashan Buyback analysis is to bring forth the facts and caution an investor that every buyback may not be profitable and can turn bitter too and more so when mid caps are involved which are already in firing line at the exchanges. Further past trends like 100% acceptance ratio in 2017 buyback should not be used as the basis as investors are now more aware, there is increase in number of arbitrageurs and there is more profit booking tendency at this juncture in the stock markets leading to higher tendering of shares.