S. P. Apparels Limited Buyback 2022

i. One of India’s top producers and exporters of knitted clothing for infants and children is S.P. Apparels Limited (SPAL). The business has integrated manufacturing facilities that offer full-cycle apparel production, from grey fabric to finished goods. Additionally, the business produces and sells menswear clothing in India under the Crocodile label.

ii. The two main business divisions of SPAL are

(i) the garments division, which produces knitted clothing for babies and children and exports it, and
(ii) the retail division, which produces, distributes, and markets goods in India under the Crocodile brand.

iii. Crocodile Products Private Limited (CPPL) and S. P. Apparels (UK) Private Limited are the two subsidiaries of SPAL (SPUK). An agreement for a technology licence has been made between CPPL, a joint venture between SPAL and Crocodile International Pte. Ltd. (CIPL), and CIPL for the exclusive manufacture, distribution, and marketing of menswear under the trademark Crocodile in India.

iv. CPPL is also engaged in the business of establishing and managing units to manufacture trade deal import and export garments. In order to investigate potential marketing opportunities and conduct business with new clients in the United Kingdom, Ireland, and other European nations, SPUK was established in 2014. As of June 2018, SPAL had 24 manufacturing facilities in and around Avinashi, Tamil Nadu, and 125 km from its corporate office. SPAL uses a hub-and-spoke business model.

v. The company’s facilities have a wide range of infrastructure and equipment for the production of yarn, dyed fabric, sewing, cutting, printing, embroidery, and finishing of garments, allowing the company to quickly fulfil orders from multiple large customers.

Buy Back Offer Deal:

Buyback Type: Tender Route
Buyback Record Date: Oct 07 2022
Buyback Offer Amount: ₹ 35.1 Cr
Date of Board Meeting approving the proposal: Sep 21 2022
Date of Public Announcement: Sep 21 2022
Buyback Offer Size: 5.68%
Buyback Number of Shares: 6,00,000
Price Type: Tender Route
FV: 10
Buyback Price: ₹ 585 Per Equity Share

Details of Buyback:

Board of Directors of S.P. Apparels Limited ('Company') at their meeting held today viz. September 21, 2022 have approved the proposal to buy back up to 6,00,000 fully paid up equity shares having a face value of  10 (Rupees Ten Only) each representing up to 2.34% of the total number of equity shares in the paid-up equity share capital of the Company, at a price of 585/-  per Equity Share ('Buyback Price') payable in cash for a maximum amount not exceeding 35,10,00,000/-(Rupees Thirty Five Crore and Ten Lakh Only) ('Buyback Size'), representing 5.68% and 5.62% of the aggregate of the fully paid-up equity share capital and free reserves of the Company.

Salient financial parameters:

Particulars (in Cr) Mar 2019 Mar 2020 Mar 2021 Mar 2022
Sales 825 808 652 859
Expenses 691 724 547 707
Operating Profit 134 84 105 152
OPM % 16% 10% 16% 18%
Other Income 3 13 1 9
Interest 6 23 14 12
Depreciation 22 30 32 35
Profit before tax 109 44 59 115
Tax % 33% -6% 27% 26%
Net Profit 73 47 43 85
EPS in Rs 28.56 18.26 16.8 32.96

How to Participate in buyback?

1. Firstly to be eligible for the buyback the investor should have shares of S. P. Apparels Limited Buyback 2022 in demat or physical form as on record date on 07.10.2022 2. Once you have shares in demat, you can participate in the buyback process which is opening from [ To be updated ] by selling your shares through your broker on NSE or BSE. 3. Then on [To be updated ], the settlement will be done for accepted shares and unaccepted shares will be returned to your demat account

Profit from the buyback on the bases of acceptance Ratio:

Buy 341 Shares at CMP of Rs. 447 (2,00,000/585 = 341)
Acceptance Ratio 33% 50% 75% 100%
Amount Invested in Buyback 1,52,427 1,52,427 1,52,427 1,52,427
No. of Shares buyback 112 170 255 341
BuyBack Profit 15,456 23,460 35,190 47,058
Profit 10% 15.3% 23% 30.8%

Recommendation:

Review and Recommendation of SP Apparel Buyback 2022 from our IZ team is: 4/10 [Almost 36% arbitrage is available between CMP and Buyback Price. However, the size of Buyback is very small at Rs.35 Crores. Current Entitlement is 4%]

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