Risk Free Return: IPO has come out in the country. In such a situation, investors are investing heavily to earn profit. But this haste also runs the risk of losing investors, as in the case of Windlass Biotech, which was listed at a 5% discount.
Whereas, on the other hand, in buyback offers, investors can get high returns at very low risk. IT consulting and outsourcing company eClerx Services has announced a buyback at Rs 3200 per share. Let us get to know more about buyback offers and how you can get returns of up to 38 per cent by joining them.Also Read: FREE ITR Filing: Now file ITR for free through these 4 websites, only salary information will have to be given, know how?
Offer information
During an exchange filing on August 13, the company said that it would buyback 9,46,875 equity shares at Rs 3,200 per share.
The total shares to be purchased represent 20.59% of the total paid-up equity share capital and Free Reserves of the Company as on 31st March, 2021 as per the latest Standalone and Consolidated Audited Financial Statement.
Buyback will be done through “Tender Offer” route. Promoters and members of the promoter group of the company will participate in the proposed buyback.Also Read: HDFC bank announce flat processing fee loan against securities sbi offers for retail customers
As on 6 August, the promoter and promoter group held 53.81% of the total equity capital. This was followed by foreign institutional investors holding 18.09% and mutual funds holding 15.21%. While total 8.32% equity is with others.
Arbitration opportunity
The buyback offer till 3 PM on August 17 is 38% from its current price of Rs.2315 or at a premium of Rs.885. A retail investor can benefit from this arbitrage as the stock is trading at a discount of Rs 885 to the buyback offer price.
As per the norms of Securities and Exchange Board of India, 15% offer is reserved for retail investors with holding up to Rs.2 lakh in the company. Hence to qualify as a retail investor, one can buy a maximum of 62 shares (2,00,000/3,200 = 62).Also Read: Raksha Bandhan 2021: Tie rakhi at this time can be heavy, know Shubh Muhurat
But the acceptance ratio will change your returns. Acceptance ratio is the number of shares accepted in a buyback offer as compared to the total number of shares that have been tendered. The matrix given below will help you to understand the returns better under different acceptance ratios.
E Clerx service buyback math
Retail investors can participate in the buyback offer as per the opinion of the market experts as the acceptance ratio should be around 33%.
