Mphasis Buyback offer 2018

Mphasis-buyback-offer-2018
Mphasis
(BSE: 526299; NSE: MPHASIS) applies next-generation technology to help enterprises transform businesses globally. Customer centricity is foundational to Mphasis and is reflected in the Mphasis’ Front2Back™ Transformation approach. Front2Back™ uses the exponential power of the cloud and cognitive to provide hyper-personalized (C = X2C2™ = 1) digital experience to clients and their end customers. Mphasis’ Service Transformation approach helps ‘shrink the core’ through the application of digital technologies across legacy environments within an enterprise, enabling businesses to stay ahead in a changing world. Mphasis’ core reference architectures and tools, speed and innovation with domain expertise and specialization are key to building strong relationships with marquee clients.

Buy Back Offer Deal:

Buyback Type: Tender offer
Buyback Offer Amount: ₹ 988.275 Cr
Date of Board Meeting approving the proposal: Aug 07 2018
Date of Public Announcement: Aug 07 2018
Buyback Offer Size: 3.79%
Buyback Number of Shares: 7,320,555
FV: 10
Buyback Price: ₹ 1350 Per Equity Share

Details of Buyback:

The Company, at its meeting held today on 07.08.2018  which , inter-alia, approved a proposal for Buy-back of equity shares (“Buy-back”) from all the existing shareholders of the Company on a proportionate basis through the “Tender Offer” method in accordance with the provisions of Securities and Exchange Board of India (Buy-Back of Securities) Regulations (the “Buy-back Regulations”) and the Companies Act, 2013 and rules made thereunder at a maximum price of Rs.1,350/- (Rupees One Thousand Three Hundred and Fifty only) per equity share, aggregating to an amount not exceeding Rs.9,882.75 Million (Rupees Nine Thousand Eight Hundred and Eighty Two Million and Seven Fifty Thousands ).

Salient financial parameters:

Year Asset(Cr) Revenue(Cr) PAT(Cr) EPS
2016 7416.84 2909.88 457.14 21.78
2017 7317.09 2945.45 625.01 29.76
2018 6985.34 3114.92 739.89 37.69

How to Participate in buyback?

1. Firstly, to be eligible for the buyback the investor should have shares of Mphasis Buyback offer 2018 in demat or physical form as on record date [Not Announced Yet]. 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 148 Shares at CMP of Rs.1150[ 2,00,000/1350=148)
Acceptance Ratio 33% 50% 75% 100%
(i) Amount Invested in Buyback 170200 170200 170200 170200
(ii) No. of Shares buyback 48 74 111 148
(iii) BuyBack Profit 9600 14800 22200 29600
(iv) Profit 6% 9% 13% 17%

Recommendation:

Mphasis Buyback offer 2018 Review and Recommendation by InvestorZone team => Apply

    15% of 7,320,555 No. of Equity Shares =.11 Cr No. of Shares Reserved for Small Shareholders.

    Mphasis buyback –

    The promoters are also intending to tender their shares in the buyback by Mphasis In its report, *HDFC securities* highlighted that “Even assuming 60% acceptance ratio and the market price not falling below Rs 1,080 post the payout, investors can earn an absolute return of 8% (subject to short term capital gains tax) over the next 90 days (maximum average time taken from board approval to payout in recent tender offers) leading to an annualized return of ~32% p.a. Every 5% increase in acceptance ratio could improve annualized return by 4.7% p.a”.

    Mphasis in March 2017 also made a similar buyback offer during which shares tendered by the small shareholder category amounted to be less than the reserved portion for them as a result acceptance ratio turned out to be higher than the theoretical value arrived at for acceptance of shares by the company during the buyback.

    During last buyback 26 Lacs Shares were reserved for retail category and out of that only 23 lacs shares bid were received. So last time 100% shares were buyback. This time as on June 2018, Retail shareholders are having total 44,83,601 Equity Shares and assume this will go upto say 50,00,000 Equity Shares till record date. If we assume 50% of 50,00,000 shares will bid for Buyback then, Acceptance Ratio would be around 44-45%.

    *Mphasis Limited*
    *Buy – back*
    *View : Positive*
    UPSIDE % = 17 % ( difference between Buy-Back price and CMP – Rs.1152.50)
    Promoter’s Holding = 52.37%
    Public holding upto Rs.2Lacs = 2.32% = 4483601equity shares
    CMP = Rs.1152.00/- per share
    MARKET CAP = Rs. 22281.49 crore
    *BUY – BACK Price = Rs1350 per share*
    Buy Back of Shares = 7320555 equity shares (representing 3.79% of the total number of equity shares in the paid-up share capital of the Company)
    *Route : Tender offer*
    Retail Acceptance ratio = 25% ( higher probability of acceptance may go upto 40-50%)
    Overall Acceptance ratio= 4%
    Total Buyback size : Rs 988 Crores
    Promoter’s would participate.

      Should we buy Emphasis at CMP for buyback purpose or wait for further downside.

      What is the safe level for this purpose?

      What does negative reaction after announcement signify?

        I would say we should start accumulating Mphasis at current levels and add on dips. We have seen how investors were waiting for TCS to fall below 1800 to make an entry but unfortunately, it didn’t break that level and inversely keep on rising from thereon. So averaging is a good option in Mphasis. The company has posted excellent Q1 numbers that will also support price. Please remember to be eligible for buyback under the retail category you should not have shares worth more than 2 lacs as on Record Date( which is to be announced later) else your bid will be rejected while tendering.

    Mphasis has made a stunning performance in Q1

    i) Net profit attributable to shareholders growing 38 percent to Rs 258.3 crore in the said quarter from Rs 187.19 crore in the year-ago period.

    ii) Revenue from operations increased 18.5 percent to Rs 1,820.22 crore in the quarter under review as against Rs 1,535.97 crore in the same period last fiscal.

    iii) The company has bagged deal worth USD 153 million in total contract value in Direct International business.

    Will also see participation from the Promoter in this buyback who has 52.36 percent shareholding.