Bajaj Auto’s Rs 4,000-Crore Share Buyback Begins on March 6

Investors showed interest in Bajaj Auto shares on Wednesday as the company’s share buyback program began today. Bajaj Auto shares rose by almost 2% to reach ₹8,515.55 each on the BSE.

Bajaj Auto’s buyback to raise up to ₹4,000 crore began today, March 6, and will end on March 13. As part of the scheme, Bajaj Auto intends to repurchase 40 lakh equity shares, constituting 1.41% of the total outstanding shares, through the tender route.

Bajaj Auto’s buyback price is established at ₹10,000 per share, marking a more than 19% increase from its Tuesday’s closing price of ₹8,351.80 each.

However, is it advisable for stock market investors to tender their shares in Bajaj Auto’s buyback? Let’s explore analysts’ perspectives.

Is it advisable to participate in Bajaj Auto’s share buyback ?

Analysts view the ₹10,000 share buyback price offered by Bajaj Auto as highly attractive, suggesting that short-term investors may consider tendering their shares. However, they recommend long-term investors to retain their Bajaj Auto shares.

According to Ashwin Patil, Senior Research Analyst at LKP Securities, Bajaj Auto stands out as a top pick in the auto sector. He advises that while short-term investors seeking quick gains may opt to tender their shares, long-term investors should hold onto them. Patil highlights the company’s positive factors such as the premiumization trend, increasing sales of the Chetak Electric Scooter, and improving exports, which are expected to drive the share price in the future.

Thus, Patil recommends that long-term investors retain their Bajaj Auto shares and abstain from tendering them in the buyback due to the company’s robust fundamentals and promising growth prospects.

Atul Parakh, CEO of Bigul, highlighted that Bajaj Auto’s buyback, offering a 24% premium for 2.33% equity, presents an appealing exit option for investors considering selling.

However, Parakh advised long-term investors bullish on the company’s future to hold their positions, citing Bajaj’s strong brand, market standing, financial health, and growth endeavors. He acknowledged positive factors like new product launches and expansions but cautioned about short-term challenges such as input costs, competition, and macroeconomic conditions.

In summary, Parakh emphasized that Bajaj Auto remains a well-managed player in the two-wheeler industry with solid fundamentals.

Echoing similar sentiments, Avinash Gorakshakar, Head of Research at Profitmart Securities, suggested that investors who bought Bajaj Auto shares a few months ago with a short-term perspective may consider participating in the buyback.

“The buyback price of ₹10,000 per share is quite appealing, offering investors a good opportunity,” remarked Gorakshakar.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd., suggests that tendering shares could be wise if one is uncertain about Bajaj Auto’s future and satisfied with locking in a profit.

“If you believe in Bajaj Auto’s long-term potential, holding onto your shares might yield future gains rather than selling at a premium now. The decision to tender shares depends on your investment goals and risk tolerance,” Gour explained.

Regarding Bajaj Auto’s Share Buyback

Bajaj Auto’s share buyback will run until March 13. The registrar will verify tender forms by March 18, and bids will be settled on the stock exchanges by March 20. Shares repurchased by Bajaj Auto will be extinguished by March 26.

The board of directors of Bajaj Auto set February 29 as the record date for the buyback, which is conducted on a proportionate basis through the “Tender Offer” route.

The board approved the buyback of up to 40,00,000 fully paid-up equity shares with a face value of ₹10 each at ₹10,000 per equity share, totaling an aggregate amount not exceeding ₹4,000 crore.

This amount constitutes 16.33% and 14.49% of the total issued and fully paid-up equity share capital and free reserves, respectively, representing approximately 1.41% of the total issued and paid-up equity share capital of the company as of March 31, 2023.

For retail investors, holding investments up to ₹2 lakh, the share entitlement ratio is set at seven equity shares for every 27 equity shares held on the record date, resulting in a 25.9% acceptance rate.

In the general category, the buyback entitlement is determined as 1 share for every 82 shares held on the record date. The expected final acceptance rate falls within the range of 26-30%.

Bajaj Auto’s promoters and promoter group have indicated their intention to participate in the share buyback, potentially tendering up to a maximum aggregate of 18,75,657 equity shares, as per the company’s statement.

Currently, the promoters and promoter group collectively hold 54.94% of the total equity share capital of Bajaj Auto.

As of 12:10 pm, Bajaj Auto shares were trading 1.31% higher at ₹8,461.20 per share on the BSE.

The entitlement ratio for Bajaj Auto’s share buyback

In addition to outlining the buyback schedule, Bajaj Auto has disclosed acceptance ratios for general and institutional shareholders.

For these categories, Bajaj Auto will repurchase one equity share for every 82 equity shares held on the record date, equating to a 1.22% acceptance rate. Abhilash Pagaria from Nuvama Alternative & Quantitative Research mentioned that at least 1.22% of shares will be accepted, potentially slightly higher in certain cases.

Regarding retail investors, encompassing individual shareholders with investments up to ₹2 lakh, the share entitlement ratio stands at seven equity shares for every 27 equity shares held on the record date, resulting in a 25.9% acceptance rate.

Consequently, a minimum of 26% of shares will be accepted, with the final acceptance anticipated to fall within the range of 26-30%, according to Nuvama’s analysis.

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