Directors have approved nearly 15% of shares to be bought back at Rs.250.
Inviting views from members.
Wow, that’s nearly 25% up from current price. And there’s also a 5% immediate dividend payout coming, at 200 CMP.
One issue is that the promoters are selling, so with 15% buy-back rate, most of our shares (70-85%) will remain stuck in our hands.
To break-even with a 70% subscription rate, we need to be sure that the stock does not fall below 160. It does seem likely, but notguaranteed by any stretch of imagination.
Would love to know from other experienced members - what timeframe are we looking at here? How long do these tenders usually take to execute?
Prasanna,
Company plans to buy back around 9.2 million shares. Out of this, around 15% is reserved for small shareholders who hold about 30 lakh shares. Hence, around 50% of the tendered shares is expected to get accepted.
Assuming one buys 1000 shares at 198, the mathematics might look like:
Scenario 1
a.Rs.9 per share dividend if bought before 20-Jan-2014 = 9000
b. 500 shares at Rs.250 (acceptance of 50% of tendered shares) = 1,25,000
c. Remaining shares would get sold at something like 150 = 75000
Absolute gain = 11,000 = 5.5% in about 3-4 months
Scenario 2
a.Rs.9 per share dividend if bought before 20-Jan-2014 = 9000
b. Stock appreciates to around 210 after 20-Jan-2014 and before ex date forbuy back= 2,10,000
Absolute gain = 21,000 = 10.61% in less than 3 months
Requesting fundamental views from some of the members who I’m sure would be tracking this company closely.
Sreeselva,
Thank you for the clarification. A few more queries from my side…
(1) Where does it say 15% of total buy backs are reserved for shareholders with less than 30L shares?
(2) How do we know the buy-back will finish in ~4 months. Is it like the average time we should expect?
Thanks,
-Prasanna
Few queries (in bold)-
How do you know small shareholders are holding only 30 lakh shares? Non-promoters & non-institutions hold 13.60% which is 86.80 lakh shares.
If its indeed 30 lakhs then much more than 50% will get accepted. No?
Scenario 2
a.Rs.9 forbuy back= 2,10,000
Are you not speculating here about stock reaching 210?
15% of total buy back of 14.49 is reserved for small shareholder…definition of small shareholder is one who holds 2 lakh worth of shares on record date…
avg time for buyback from announcement is 2 month …last example is vls finance…date of announcement -10 dec 2013…payment 08th feb 2014
I guess Manoj’s answers cover what i had to say, just that i’m expecting this one to take a couple of notches longer than 2 months since a couple of major approvals are pending.
Jatin,
1). I’m expecting 50% on the worst side. Higher’s always better 
2). Reaching 210 is indeed speculation. However, it is based on the historical behaviors of stocks in such situations. So, you can say it is a calculated gamble.
You left the most imp question-
How do you know small shareholders are holding only 30 lakh shares? Non-promoters & non-institutions hold 13.60% which is 86.80 lakh shares.
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Jatin,
1).
2).
In large shareholder category i dont think 50% would be accepted…acceptance ratio would be less i think because lot of institution are there…(my assumption , i could be wrong)
In this company small to large shareholder ratio isvery low…i man small shareholder would be 4% of equity … so person should buy less than 2 lakh category where i assume acceptance ratio would be more than70%…for ex ample if person has 5 demat ac of his/her family and wants to buy8-10 lakh rs worth shares… he shoud divide into 5 a/cs …
for quantity more tha 2 lakh , it would be difficult to comment how institation take parts in buyback…difficult to read their mind…Pharma is in fancy …they might not participate or they might be.small shareholder dont tender shares that easily and ratio of acceptence is also very high there
Jatin,
I haven’t ignored that question. I didn’t answer the question because Manoj had already responded to it and i have alluded to his post in my response.
Alternatively, please have a deeper/second level look at the non-institutional holdings and you will get your answer.
Again requesting knowledgeable members to share some details about the soundness (or the lack) of the business model.
** How shares.
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For tentative idea of small shareholding ,go to www.bseindia.com and check shareholding of clarsis …( investor upto 1 lakh )
For tentative idea of small shareholding ,go to www.bseindia.com and check shareholding of clarsis …( investor upto 1 lakh )
As far as my knowledge of Claris goes… promoters could be a cause of worry… they previously owned CORE parenterals (later sold to Nirma) that was under lot of debt. Also the topline hasn’t really grown (range of ~700 crs for the past few years) much for the company. Also they have formed a JV with Japanese players (one of them 3rd largest globally in Intra Venous (IV)) for IV fluids (major portion of their sales) wherein 80% is with other members. So fundamentals wise, its a bit shaky
Given the fact that 15% of the buyback will be reserved for small shareholders (i.e. shareholders with less than 2L worth of shares as on record date, 2 April), does it not make sense to buy shares at CMP (186)?
As at 31 December only 3.63% of the book was shareholders holding less than 10,000 shares, even assuming ALL of these hold less than 900-1000 shares, this would imply that about 60% of your shares (if you own less than 2L worth of shares), will get taken up in the buyback at 250 per share.
If 60% of your shares get bought back at 250, your break-even sale price for the remaining 40% shares is Rs. 90/share (50% less than CMP). Even if stock price drops to 150 after the buyback (and you sell the remaining 40% shares at that price), you still make a ~12% profit on your entire investment, which isnt bad for a two month holding period.
Any idea on what the catch is and why the shares are trading at a price that allow for such an opportunity?
Hi Hardik,
Yes, this one looks good. I’m participating…lets see how it pans out.
Ayush
Disclosure - Investing in it as a special situation case.
This one is behaving strangely. Down 3.5% today on heavy volumes. Any theories on who could be selling if new retail investors have an incentive to buy for short term?
From the charts it looks like, the big boys had accumulated claris when the news came out, in the hopes that the retail investors would push up the price, after which they can get out. The markets remained inefficient till the record date and they nervously sold off their holdings at a loss. My hypothesis