Smartlink Holdings Limited Buyback 2019

Smartlink Holdings Ltd., earlier known as Smartlink Network Systems Ltd. ,  is one of India’s leading networking company. It was established in the year 1993 to prop the Indian market in the field of Network Infrastructure. Pioneer in the field of Active networking, Smartlink has a rich history of making many product brands reach the desired heights in the Indian and international markets. Smartlink now is an NBFC company, with its operations split into 3 wholly-owned subsidiaries to have a focused business approach. The Smartlink subsidiaries are:-

1. DIGISOL SYSTEMS LTD.: DIGISOL Systems Ltd is a brand product company which looks after the sales, marketing, service, and support of DIGISOL brand of active and passive (Structured cabling) products and solutions. The company is headquartered in Mumbai, India.

2. SYNEGRA EMS LTD.: Synergy is an EMS ODM company which is into manufacturing of Active networking range of products. The company has a huge, state of the art manufacturing set up in Goa, India.

3. TELESMART SCS LTD.: Telesmart is an EMS ODM company which looks into manufacturing of Passive (Structured Cabling) range of products in its technologically advanced manufacturing factory set up in Goa, India.

Buy Back Offer Deal:

Buyback Type: Tender Offer
Buyback Offer Amount: ₹ 54.60 Cr
Date of Board Meeting approving the proposal: Jun 14 2019
Date of Public Announcement: Jun 14 2019
Buyback Offer Size: 24.85%
Buyback Number of Shares: 4200000
Price Type: Tender Offer
FV: 2
Buyback Price: ₹ 130 Per Equity Share

Details of Buyback:

The Board of Directors of the Company on 14 June 2019, has inter­alia approved the buyback proposal for purchase by the Company of its own fully paid equity shares of Rs. 2/-each ('Equity Shares')  not exceeding 42 Lakh Equity Shares (approximately being 24.78% of the total paid-up equity capital of the Company) at a price not exceeding Rs. 130/-  per Equity Share ('Buyback Offer Price'), for an aggregate amount not exceeding Rs. 54.60 Cr (being less than 25% of the total paid-up equity capital and free reserves of the Company as on 31 March 2019 from the shareholders of the Company, on a proportionate basis, through the 'Tender Offer' route.

Salient financial parameters:

Particular(Cr) FY19 FY18 FY17 FY16 FY15
Revenue 18.53 18.06 21.64 70.5 90.92
Other Income 1.75 2.91 2.52 32.72 38.23
Total Income 20.28 20.97 24.17 103.22 129.15
Expenditure -43.57 -5.25 -8.01 -94.5 -112.39
Net Profit -27.72 11 5.17 4.38 13.21
EPS -15.03 4.88 2.12 1.46 4.4
The company is continuously losing revenue in the last 5 years. This year they incurred a loss of 27 Cr. Price Movement Source: Moneycontrol. The share price has moved up sharply in the last one week in the anticipation of the buyback. The AR of last year buyback was 100% so that may be the reason for this much buying.

How to Participate in buyback?

1. Firstly, to be eligible for the buyback the investor should have shares of Smartlink Holdings Limited Buyback 2019 in demat or physical form as on the record date [ Not Announced] 2. Once you have shares in demat, you can participate in the buyback process which is opening from [ Not Announced ] by selling your shares through your broker on NSE or BSE. 3. Then on [ Not Announced ], 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 1538 Shares at CMP of Rs. 108 [2,00,000/130=1538)
Acceptance Ratio 33% 50% 75% 100%
Amount Invested in Buyback 1,66,104 1,66,104 1,66,104 1,66,104
No. of Shares buyback 507 769 1076 1538
BuyBack Profit 11154 16918 23672 33836
Profit 6.71% 10.18% 14.2% 20.3%

Recommendation:

Review and Recommendation of Smartlink Holdings Limited Buyback 2019 Buyback 2019 by IZ team is: [ Under Process ]

    *************LAST YEAR BUYACK*************

    A) Strategy-1 ( Buy after buyback announcement and sell on Ex-date and then buy when LOF comes)

    1. Public Announcement = 04.05.2018, the share price was 106. So you must have bought 1666 shares which states an investment of Rs. 1,76,666.

    2. Buyback Size= 56,00,000 Shares

    3. Buyback Price = 120

    4. Record date= 18.05.2018. The price fell from 108 to 98 on Ex-date i.e. 17.05.2018. You also must have sold all 1666 shares on ex-date and buy again when LOF is announced. The loss of selling the shares on ex-date would be 1666*8= 13,328

    5. Letter of Offer given on 03.06.2019. As per the letter of offer, the Entitlement was 28%. So you may have bought 466 shares at 93.60 that means an investment of 43662 and tender these shares on buyback. So profit while tendering is 12302.

    So overall we can say in this strategy we may have occurred a loss of around 1000.

    B) Strategy-II ( Buy after buyback announcement and tender all shares in buyback)

    1. Public Announcement = 04.05.2018, the share price was 106. So you must have bought 1666 shares which states an investment of Rs. 1,76,666.

    2. Buyback Size= 56,00,000 Shares

    3. Buyback Price = 120

    4. Buyback opens up on 13.06.2018 to 26.06.2018. You must have tendered all 1666 shares in buyback.

    5. The Final AR was 100%. So your overall profit would be 23324

    So we can conclude that depending upon the strategy we can make profit n loss. However, which is the best strategy to gain from the buyback is still a difficult task to predict.