BSE (Bombay Stock Exchange)- Bet on Financialization?

(Chandra) #43

Thanks Rahul for the useful information. The BSE Board meeting date is 15th Jan.
Best regards.

(sambandham82) #44

Why company is selling shares at 800 in jan-2017 and buyback at 1000+ (expected 5% minimum premium to CMP) in feb-2017. Does it not affect the share holders who sold in IPO. why they dont get themselves paid with hefty dividend before IPO and reduce cash on book or sell their shares at a higher valuation in IPO due to huge cash pile up.

Question may look silly but i am confused. Please help to understand.

(TT) #45

Let’s be clear - the Company itself never sold shares, the IPO comprised completely of shareholders selling their existing stakes. Further, the Company does not have a promoter. Either way, dividends are an inefficient way to distribute capital.

Think of it this way - if you keep holding what you have right now, your equity may be 7-9% more valuable by the time the buyback is done. Sure, you don’t get cash, but that would have come after being taxed twice, at the minimum. If you are an existing shareholder and keep holding after buyback, your equity became more valuable without any tax outgo.

(sambandham82) #46

I have mentioned in this statement that shareholders and not company or promoter who sold shares in IPO.

My question is why the board and few of the leading shareholders(LIC and SBI held 4.8%) did not benefit from any of the following methods:

  1. By selling at a higher valuation (tax efficient method) in IPO OFS.
  2. Paying dividend (DDT loses 20% of cash but still reasonably profitable for shareholders before IPO).
  3. Is it not possible for LIC or SBI to sell their shares to company (like a buyback before IPO) at 1000+ level?

(TT) #47

This is a question in hindsight. Why did Avenue Supermarts not sell/issue shares at 1000 instead of 300? Pricing is generally done by investment bankers.

The answer to your question is in the question itself - why lose 20% of the cash to tax? Also, I don’t think this is a good practice - Indigo stripped the company bare before the IPO. Sad for IPO buyers.

Being a public limited company, you cannot buy selectively from some persons and not from others - equal opportunity has to be given. More importantly, the decision is not for LIC or SBI to sell to the company, it is for the company to decide to do a buyback, which again, has to be offered to all investors.

(sambandham82) #48

I think my point of view is misunderstood.

Take the case of MOIL.It came with buyback at 234 when cash/share was 180. Today(after 1.5 yr), it is at 510 (adjusted to bonus) and still available to reasonable valuation (May be EV of 8-10 X FY19E EBITDA). Why govt of India should opt for tendering their shares at such cheap valuation in 2016 when manganese was at the negative part of cycle. Same holds good for EIL, NMDC. Fundamentally cheap but still sold at cheaper valuation by promoter (govt of india) for HNIs and FIIs to take advantage.

BSE has appreciated only by 15% in a year even when markets are in a state of euphoria.BSE has got net cash of 2500 Cr (> 50% of mktcap) and still trades at 20-23 X FY19E EPS.

Avenue supermart trades at >100 P/E. No one can predict right price for speculation.

My question is " Before going for IPO, is it possible for all shareholders to sell their stake (similar to buyback) to company so that they get fair value of 900+ even in 2016. In general, people opt to clean up cash before stake sale. In fact, that is the right approach. After all why one should sell cash on book for cash?

So i am not biased with hindsight advantage but based on sheer valuation, does management or leading shareholders misprice during IPO/OFS/buyback? Thats my question.

BSE can easily be sold at 1000 during IPO if management feels fair value for buyback is 1000+ now. In my view fair value is 1100+ today.

(sambandham82) #49

(sambandham82) #50

At 925/share, NSE is valued at 46000 Cr market cap. With netprofit of 1218 Cr, it is trading at 37.6 P/E whereas BSE trades at 25 P/E. Is this valuation gap justifiable like in case of CARE and CRISIL?

(AmitContrarian) #51

Yes , NSE should trade at premium to BSE, BSE make almost nothing from trading activity, also i believe IPO price going to be even on the higher side for NSE.

(AmitContrarian) #52

Do update guys if you find any info related to this.

(abhishkjain2626) #53

bm.pdf (781.7 KB)

Info on Buyback: Open market route, at Rs. 1100/- , total value 166 crores.

(TT) #54

It seems to be a replacement for dividend, considering the yield was around 3% and the buyback will also reduce equity by around 2.8% - maybe they will give small dividend along with it, INR 5 or so, on account of the tax efficiencies obtained via buyback.

(rahulshetty0088) #55

Board has announced the buyback.

(abhishkjain2626) #56

By the way, Will the share price jump to around 1,100 tomorrow?

(AmitContrarian) #57

I don’t think so, This should be seen as a dividend.

I think buyback ratio coming out to be 6.6 % for retailers holds < 2 lacs as per sep shareholding pattern.

(abhishkjain2626) #58

Sir, can there be a pro-rata buyback ratio even when the mode of buyback is through open market?

Experts please enlighten me: According to laws, Does a company have to announce that it intends to purchase shares (buyback) even when its from the open market? Or can they just buy (assuming its not a significant quantity) whenever they feel like it?

(TT) #59

It is the latter, company will buy when it likes.

(Sreekanth) #60

_“The dollar-rupee is the most popularly traded pair, holding about 95 per cent market share,”

(Sreekanth) #61

Another feather to BSE’s cap is RBI’s Deputy governor Shri S.S. Mundra being added to already eminent list of board of directors…

If we compare it against those sitting on NSE ( it’s really something which should make extremely comfortable with people who are running the show at BSE.

Further Company has also announced Q3 results to be declared on February 02, 2018.

Let’s hope for the best.

(SSRN) #62

For investors planning to stick to the company and not participate in buyback an open market route is probably better as the effective cost of buyback could be lower.