NTPC Buyback 2020

1. The total installed capacity of the NTPC is 62,910 MW (including JVs) own stations include 24 coal based, 7 gas based, 1 Hydro 1 Wind 11 Solar and 1 Small hydro plant. Under JV, NTPC has 9 coal based, 4 gas based and 12 renewable energy projects. The capacity will have a diversified fuel mix and by 2032, non fossil fuel based generation capacity shall make up nearly 30% of NTPC’s portfolio. NTPC has been operating its plants at high efficiency levels. As on 31.03.2019 the company had 15.5% of the total national capacity and, it contributes 22.3% of total power generation due to its focus on high efficiency.

2. NTPC became a Maharatna company in May 2010. As of January 2020, there are 10 Maharatnas CPSEs in India. NTPC is ranked No. 2 Independent Power Producer(IPP) in Platts Top 250 Global Energy Company rankings.

3. NTPC has comprehensive Rehabilitation & Resettlement and CSR policies well integrated with its core business of setting up power projects and generating electricity. The company is committed to generating reliable power at competitive prices in a sustainable manner by optimising the use of multiple energy sources with innovative eco-friendly technologies thereby NTPC is contributing to the economic development of the nation and upliftment of the society.

Buy Back Offer Deal:

Buyback Type: Tender offer
Buyback Record Date: Nov 13 2020
Buyback Opening Date: Dec 07 2020
Buyback Closing Date: Dec 18 2020
Buyback Offer Amount: ₹ 2275
Date of Board Meeting approving the proposal: Nov 02 2020
Date of Public Announcement: Nov 02 2020
Buyback Offer Size: 2.19%
Buyback Number of Shares: 19,78,91,146
Price Type: Tender Offer
FV: 10
Buyback Price: ₹ 115 Per Equity Share

Details of Buyback:

Buyback of not exceeding 19,78,91,146 of equity shares of face value of Rs. 10 each ("Equity Share") (representing 2% 'of the total number of fully paid-up equity shares in the paid-up share capital of the Company) at a price of Rs. 115 per equity share (the "Buy Back Offer Price") payable in cash for an aggregate consideration not exceeding Rs. 2275,74,81,790 the "Buyback Offer Size" representing 2.19% & 2.01 % of the aggregate of the fully paid-up equity share capital and free reserves as per the audited standalone and consolidated financial statements of the Company, respectively for the financial year ended March 31, 2020.

Salient financial parameters:

Particulars (in Crs) Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
Sales 79,957 73,396 82,042 88,083 1,00,287 1,09,464
Expenses 62,632 54,847 60,480 65,709 77,588 77,878
Operating Profit 17,324 18,550 21,562 22,375 22,699 31,586
OPM % 22% 25% 26% 25% 23% 29%
Other Income 2,365 1,206 1,627 5,686 2,830 8,209
Interest 3,669 3,366 3,753 4,447 5,605 8,189
Depreciation 5,565 5,771 6,010 7,460 8,669 10,356
Profit before tax 10,456 10,618 13,426 16,154 11,255 21,250
Tax % 4% -2% 20% 35% -25% 44%
Net Profit 9,986 10,801 10,720 10,544 13,737 11,600
EPS in Rs 10.09 10.92 10.83 10.66 13.88 11.72
Source: Screener.in

How to Participate in buyback?

1. Firstly, to be eligible for the buyback the investor should have shares of NTPCBuyback 2020 in demat or physical form as on record date [13.11.2020] 2. Once you have shares in demat, you can participate in the buyback process which is opening from [07.12.2020 to 18.12.2020], by selling your shares through your broker on NSE or BSE. 3. Then on [30.12.2020] 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 1739 Shares at CMP of Rs.90( 2,00,000/115=1739)
Acceptance Ratio 33% 50% 75% 100%
Amount Invested in Buyback 156510 156510 156510 156510
No. of Shares buyback 574 870 1304 1739
BuyBack Profit 14347 21738 32606 43475
Profit 9.17% 13.89% 20.83% 27.78%

Recommendation:

Review and Recommendation of NTPC Buyback from our IZ team is: 7/10 1-5: Fair 5-7: Good 7-10: Excellent. [Expected AR = 30%]

    NTPC Category Ratio of Buyback
    Reserved Category 91 Equity Shares out of every 654 fully paid-up Equity Shares held on the Record Date
    General Category 9 Equity Shares out of every 518 fully paid-up Equity Shares held on the Record Date

    (The above Ratio of Buyback is approximate and providing indicative Buyback Entitlement. Any computation of
    entitled Equity Shares using the above Ratio of Buyback may provide a slightly different number due to rounding
    off. The actual Buyback Entitlement for Reserved Category for Small Shareholders is 13.91452254% and General
    Category for all other Eligible Shareholders is 1.737460002%

    Reserved Category 91 Equity Shares out of every 654 fully paid-up Equity Shares held on
    the Record Date.

    General Category 9 Equity Shares out of every 518 fully paid-up Equity Shares held on
    Record date

    Entitlement ratio for retail – 13.91 %

    *Ntpc Buyback*

    BUYBACK OPENS ON: MONDAY, DECEMBER 7, 2020

    BUYBACK CLOSES ON: FRIDAY, DECEMBER 18, 2020

    I had 1200 shares of ntpc on record date. I want to sell and buy 200 now. Am I eligible to submit 1000 for buy back?

    As on record date of NTPC buyback, I was having NTPC shares in my Demat account with Karvy stock broking, now I get transferred my shares from Karvy broking to some other Demat account, I want to know How I can tender my shares for buyback through other broker, which was held in my old Demat account and were eligible for buyback but now transferred to a new account through offline transfer/ transfer of account

    I want to know that Can I tender more share in respect of eligible share for buyback means suppose I have 1000 share of any company before record date and my eligible share for buyback as per accepting ratio of 50% is 500 , can I tender full 1000 share for buyback.

      Yes and you should!!
      But the acceptance of the extra share would depend on the extra share submitted and eligible shares NOT Submitted by others.
      Seeing current condition, it appears approx 50-60% of extra can be accepted…

      I had 1200 shares of ntpc on record date. I want to sell and buy 200 now. Am I eligible to submit 1200 for buy back?

      You can definitely tender more shares than entitlement. The maximum no of share that can be tendered in buyback by a share holders is however limited to no of shares held on record date.

    Bought 1100 shares before record date and sold 800 in slight profit on Diwali. Hope remaining would be accepted in buyback…
    Any idea of acceptance ratio.

    Market Wizard Sir,
    Your posts are very informative.
    Please give your opinion on other buy back offers viz NMDC, Indian Toners and Mayur Uniquotes.
    Thank you

    Sir i have 2000 shares in my demat account .am I eligible for buyback ? How many shares I need to put in buyback .pls suggest

    sir i have online demat account with edelweiss what is last date of buying ntpc share for buyback

      Yes you are eligible. The main point here is to ensure that the shares are present in your demat on the record date.

    Why HPCL is still not considered for even mentioning in this portal.Today they have declared buyback price rs 250

    if record date is 11 Nov, then which is last date for buying? and on which date we can sell all shares? i have account in Zerodha.

          You can sell the shares on the next day after the record date .If you want .The main point here is to ensure that the shares are present in your demat on the record date.

        On 14
        You can sell
        If you expect acceptance ratio will be 50%
        Then keep 50% holding and sell the remaining
        If u think price will crack further in future then sell fully and buy at lesser price the shares equivalent to expected acceptance ratio

    Can some expert please explain if NTPC buyback is also subject to Shareholder approval like TCS?
    If not, why so? I see that record date is already announced, so looks like approval is not required.

      Not required. If the buyback size is less than 10%. No approval is required.

    *Msearch NTPC Buyback update*

    *What should retail investors do with NTPC post buyback announcement?*

    Key data points for buyback acceptance:
    Total offer size : ₹ 2,275 Cr or 19,78,91,146 shares
    Buyback price: ₹ 115/-
    Buyback Offer Size: 2.19% of paid up capital
    FV: ₹ 10
    Buyback type: Tender offer
    Acceptance ratio: Approx. 30-60%

    *Msearch View:*
    We believe that the proposed buyback will be in the interest of retail investors as the shareholders of the company will benefit from return of surplus cash through the buyback programme. Stock has been an underperformer, and has already shed one-fourth of its value year-to-date and recently the stock has seen traction on the back of hopes of a buyback and looking at the proposed buyback rate of ₹ 115 against CMP ₹ 86 translating upside of 34%. As per our calculation acceptance ratio comes around 30-60% which is attractive to retail investors. NTPC also offers a healthy dividend yield of 7%-8% and is trading at an attractive valuation with P/E of 7x and P/BV at 0.7%. *Hence we recommend retail investors to buy NTPC with an opportunity to make decent gain on the back of buyback.*

      Cosmo Films is not that much of an trustable scrip for arbitrage as the recent jump is due to buyback announcement and the CMP is unsustainable .This buyback will be a classic trap as after the ex-date the price will correct to an huge extent and to sell rest of the unaccepted holdings after the buyback you may have to wait for at least 1-2 years as this is an range bound low volume scrip.

    Why stock of NTPC is underperforming in the last 5 years?

    1. NTPC main problem is the huge trade receivables which has increased from 8000 Crores to 20000 Crores in the last 5 years. This means the company is not getting payments from DISCOM in time.

    2. India is a country of surplus power. This means capacity is more and demand is less. NTPC plants hardly run on their capacity.

    3. Lower tariff of solar energy has reduced drastically in the last years denting the revenue of NTPC.

    In short, power companies in India are struggling.

    Why NTPC is coming up with a buyback?

    The cash of NTPC is on decline.

    2015= 14000 Crores

    2020 = 3000 Crores

    Now with this buyback, the cash will reduce further. Then why they are bringing buyback.

    The reason is government finances are in doldrums. The fiscal deficit is touching 7-8% and with projection of GDP decline of as high as 10% means , the government main source of income i.e. taxes are not coming think and fast due to COVID-19 disruption.

    So, that is why Government has decided to do buyback of 8 PSUs to suck out cash.

      Any view on what could be the Buyback price?

      How does buyback price gets determined…i am still learning so trying to understand.

        The buyback price is decided by management. Most of the time it is more than CMP in the market.

          1. To be eligible for the Retail Investors the number of shares should be around 1740 Shares.

          2. The number of shares reserved for Retail investors are 29683671.

          3. As per Annual Report, no. of shares between 1-5000 are 145804644.

          4. So, if we divide 29683671/145804644 = 20%.

          5. So, on an approximate basis, the AR could be around 30%. If the price moves towards the buyback price, then AR could be even higher.