Shanthi Gears Buyback 2018

Shanthi Gears—a subsidiary of Tube Investments of India—is a pioneer in gear manufacturing and ranks amongst India’s top gear manufacturers today. For over four decades now, Shanthi Gears has been the preferred name for gear and gearbox solutions, for some of the biggest names in the industry.

They offer a comprehensive range of products and services—cutting edge gear solutions for a wide range of applications and specialized gear reconditioning services.

They have 4 factories and 1000+ Employees.

Buy Back Offer Deal:

Buyback Type: Tender offer
Buyback Record Date: Feb 08 2019
Buyback Opening Date: Mar 13 2019
Buyback Closing Date: Mar 27 2019
Buyback Offer Amount: ₹ 70 Cr
Date of Board Meeting approving the proposal: Dec 26 2018
Date of Public Announcement: Dec 26 2018
Buyback Number of Shares: 50,0000,00
FV: 1
Buyback Price: ₹ 140 Per Equity Share

Details of Buyback:

Buyback of equity shares of the Company not exceeding 50,0000,00 equity shares at Face Value of 1 being 6.12% of the total paid-up equity shares of the Company at the price of 140 per equity share payable in cash for an aggregate consideration not exceeding 70 Crore being less than 25% of the aggregate of the fully paid-up equity share capital and free reserves as per the latest audited standalone accounts of the Company for the financial year ended March 31, 2018 from all equity shareholders of the company, as on record date, on  proportionate basis through a "Tender Offer" route. Further, Board has clarified that Promoters and Promoters Group have expressed their intention to participate in the buyback up to 49,06,500 Shares out of 5,73,02,913 Shares held by them. The Company has also announced a Dividend of Rs. 5, the Record Date of Buyback is set at 07.01.2019.

Salient financial parameters:

Particulars(Cr) 2017-18 2016-17 2015-16 2014-15 2013-14
Sales 219.55 203.82 182.11 165.03 166.69
PBDIT 48.73 46.33 39.86 29.89 51.56
PBIT 33.17 28.5 23.15 13.14 25.95
PBT 33.17 28.5 23.15 13.11 25.93
PAT 28.58 22.51 17.73 9.32 18.38
EPS 3.5 2.75 2.23 1.14 2.25

How to Participate in buyback?

1. Firstly, to be eligible for the buyback the investor should have shares of Shanthi Gears Buyback 2018 in demat or physical form as on the record date [08.02.2019]. 2. Once you have shares in demat, you can participate in the buyback process which is opening from [13.03.2019 to 27.03.2019] 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 1428 Shares at CMP of Rs. 132 [2,00,000/140=140)
Acceptance Ratio 33% 50% 75% 100%
Amount Invested in Buyback 1,88,496 1,88,496 1,88,496 1,88,496
No. of Shares buyback 471 714 1071 1428
BuyBack Profit 3768 5712 8568 11424
Profit 2% 3% 5% 6%

Recommendation:

Review and Recommendation of Shanthi Gears Buyback 2018by IZ team is:3/10 Fair: 1-5 Good:5-7 Excellent: 7-10 [ Not much upside in the stock from current market price as far as buyback is concerned ].

    Final Analysis of Shanthi Gears 2018 ( Return Analysis)

    1. Buyback Announcement date: 26.12.2018—– Share Price was 132.

    2. 1428 Shares bought at Rs. 132 means an investment of 1,88,496.

    3. Retail Acceptance Ratio was 100%. i.e. out of 1428 shares, 1428 shares have been buyback by the company. Profit on Accepted Shares= 11424.

    4. Overall we can say a profit of 11424 on an investment of 1,88,496 which is a 6.06% percent return in 3 months.

    Total No. of Shares reserved for Retail Shareholders are= 7,50,000
    Total No. of Shareholders up to 2 lacs in Sept 2018 are = 1,08,53,945
    Entitlement = 7%.

    As per Annual Report, the data upto 31.03.2018

    Between 1 – 500= 1524223 ( total shares)
    Between 501 -1000= 1074087 ( total shares)
    Between 1001 – 5000 = 3904995 ( total shares)

    So, total Shares between 1-5000 are close to 65 Lakh.

    As on 31.03.2018
    Individual share capital upto Rs. 2 Lacs=1,13,28,549

    As on 30.06.2018
    Individual share capital upto Rs. 2 Lacs= 1,11,79,028

    As on 30.09.2018
    Individual share capital upto Rs. 2 Lacs=1,08,53,945

    If you see the trend of a number of a share up to 2 lacs in last 3 qtrs starting from March 2018, the no. of shares are decreasing.

    So we may conclude that the number of Shareholders holding shares between 1-5000 would be more or less 65 lakhs. The no. of shareholders between 1-1500( which is we want ) may be close to 30 lakhs.

    Entitlement based on that would be between = 11%-25%.

    Shanti gear buyback price 140 Dividend Rs 5 Promoters wont tender more than 8 percent of their holding so acceptance will be good

      But the upside is very limited from CMP even after considering a dividend of Rs.5.