Hi … little bit confused with the number of shares that retail shareholders have as of March 31, 2017. I understand the AR 2017 says 2.87 crore shares were with investors holding 200 shares or less as of March 31. If you look at BSE shareholding pattern for Infosys - 14.4 crore shares were with individual share capital upto Rs. 2 Lacs as of March 31, 2017 (share price was around 935). I can see huge difference in number of shares - could anyone explain me where I am going wrong in my understanding?
Link: http://www.bseindia.com/corporates/shpPublicShareholder.aspx?scripcd=500209&qtrid=93.00&QtrName=March%202017
The shareholding pattern intimated to stock exchanges takes into account nominal value of capital. Therefore, when it says shareholders with individual share capital up to 2 lakhs - it means those holding less than 20,000 shares of INR 10 each (for a total of INR 2 lakh).
On the other hand, the Annual Report gives you a break up of shareholders holding various quantities only, without any reference to their value (real or nominal). You should rely on the AR for calculating the viability of an investment for buyback purposes.
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What could go wrong if I bought Infosys at 900 worth 2 lacs and tendered the shares in the buyback? Dont have much knowledge about buybacks and so it seems like an obvious deal to me. Please help me understand why there may not be an obvious profit in this transaction
- I am not a shareholder of Infosys so do not know what is the record date for the buyback. If the record date is already past, you cannot participate in the buyback
- The buyback applies to a certain % of shares of the company and also each shareholders. So you cannot tender your entire holding in the buyback
- As you would have held the shares for less than 1 year, the entire gain would be taxable as short term capital gain
Hi @sarthakumar19_
Here is an illustration of buy back calculation (I got it from a Whatsapp forward - source unknown).
Again this is just to give you an idea / information - by no means I subscribe or propagate the views or ideas in the attachment.
Infosys Buyback.pdf (625.0 KB)
Discl: I have bought Infy to get a feel of buy backs. No LT investment interests.
Just check what happened with MindTree buyback. People lost money due to heavy subscription (7x). So the risk is, due to its popularity, everyone is jumping and hence the edge is over.
We might never be able to fine out what happened or probably there was no smoke while the old man kept shouting publicly. On one hand he could not develop enough good leaders in-house to face challenges of tomorrow, he also hounded out a good recruit from outside. don’t know why we all love minting fake gods out of thin air.
Now that record date etc are fixed, I am curious why people are not interested I the buy back? A lot of calculations have projected buy back rate of more than 50%. Even if the buyback is around 30 to 40%, I believe it will translate into handsome gains for the investors. In this situation I’m just curious that why people are not very excited about this opportunity.
Are there concerns about the stock price for the remaining portion which is not bought back or Is it the opportunity cost of holding for that long? Or is the market anticipating a buy back rate of less than 20-30%?
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Would like to understand the basis of these statements - how do we know people are not interested?.
For me, interest is not only about the interest of existing shareholders. If there are good returns to be made, it should also interest new buyers which should create demand for the stock. And hence, I should at least see some marginal upside during some of these days. However, The stock has been more or less range bound over last few days.Wouldn’t that explain that there is not a lot of interest?
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Though most people here are thinking long term wealth creation , why not we buy Infy and make some short term gain when we get some opportunity ( at-least 15 % short term profit expected) . I feel risks are minimum here compared to reward. Disclosure : Invested, I may be biased.
I saw a video in Moneycontrol that the number of investors in Infy jumped from 7.2lakhs to 9.4lakhs in the last quarter. And people can even buy now. therefore there are a number of retail investors buying the share trying to cash out on the buyback. After a certain point it will not appear attractive anymore as the %acceptance decreases. I think it is probably less than 30% now than the initial projection of more than 60%.
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Is anyone absolutely clear on who is retailer as per definition to be really eligible for retail portion of buy back ? Those who are having equal to or less than
2L/1150
or
2L/closing price on record date?
As usual, confusion prevails in India. I have seen links giving either of the above. and then the so called experts who don’t know and hence want to be safe and only the former!!
The retail investor who holds less than or equal to Rs.200000/ as of the closing price on record date only is eligible for the pie reserved for retail investors.
Please see the highlighted part of the buy back document.
The buy back document is attached.
Infosys Public Advt Buyback - Oct 2017.pdf (690.6 KB)
Hope this clarifies.
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Thx Aditya. Clarifies for sure.
Will be a great day to buy since ADR was down almost 3.3%
So it works like this
Drawing experience from TCS buyback
*Extracted from the Letter of Offer *
*1) Definition Small Shareholder *
An Eligible Shareholder, who holds Equity Shares of market value not more
than Rs.2,00,000 (Rupees Two lakh only) on the basis of closing price on
the recognized stock exchange registering the highest trading volume, as on
the Record Date i.e. May 8, 2017, as defined in Regulation 2(1)(la) of the
Buyback Regulations.
*2) Page 25 point 19.7 (*Record Date and Ratio of Buyback as per the
Buyback Entitlement in each Category)
As defined in the Buyback Regulations, a “Small Shareholder” is an Eligible
Shareholder who holds Equity Shares having market value, on the basis of
closing price on BSE or NSE, on which the highest trading volume in respect
of the Equity Shares on the Record Date was recorded, of not more than Rs.
2,00,000 (Rupees Two Lakh Only). As on the Record Date, the closing price
on NSE, having the highest trading volume, was Rs.2,342.45 per Equity
Share. Accordingly all Eligible Shareholders holding *not more than 85
Equity *Shares as on the Record Date are classified as ‘Small Shareholders’
for the purpose of the Buyback.
Implying
So one thing is very clear from the above that using the buyback price to
arrive at the buy quantity to qualify as a small shareholder is incorrect.
e.g. in case of Infosys - Incorrect calculation would be Rs.200,000 divided
by Rs.1,150 (Buyback price) = 173 shares .
and correct calculation would be Rs.200,000 divided by current market price
(Rs.924) = 216 shares
But it is always advisable to not buy exactly 216 shares, to be on safer
side buy a position not exceeding for Rs.1.90L or max Rs1.95L
So one can buy Infy 200 shares instead of 216 shares
In case of TCS I had bought 80 shares @ 2250 which is Rs.1.80Lacs. If I had
bought exactly worth Rs.2Lacs I would have not been an eligible investor as
my holding would have been 88 shares (2lacs divided by 2250) against 85
shares as mentioned in the letter of offer.
This kind of strategy helps you to be an eligible shareholder in majority
of the cases.
Unless the share prices falls well below your purchase price on the
record-date…
Hope this helps!!
Regards
Hitendra
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Very helpful calculation. Thanks for this. However I suspect in the below example, you are assuming that the total value of Infosys stocks would not rise above 10k (if the value at the time of buy is 1.9L) or 5K (if the value is 1.95L) in the next five trading days. If and only if that is satisfied, you will be eligible for the buyback otherwise not. Is that correct?
e.g. in case of Infosys - Incorrect calculation would be Rs.200,000 divided
by Rs.1,150 (Buyback price) = 173 shares .
and correct calculation would be Rs.200,000 divided by current market price
(Rs.924) = 216 sharesBut it is always advisable to not buy exactly 216 shares, to be on safer
side buy a position not exceeding for Rs.1.90L or max Rs1.95L
So one can buy Infy 200 shares instead of 216 shares
if we go by the wording …it says…
Eligible Shareholder who holds Equity Shares having market value, on the
basis of closing price on BSE or NSE, on which the highest trading
volume in respect of the Equity Shares on the Record Date was recorded, of
not more than Rs. 2,00,000 (Rupees Two Lakh Only).
We can break the above statement as
the record price equals to
1st - Check for highest trading volume between NSE and BSE
2nd - The closing price at the one selected above will be used to determine
the record price
and yes to your question… if the share moves above the presumed difference
of 10K or 5K … then one wont be classifies as small shareholder .
the 1.90L to 1.95L is quite flexible based on ones call on the price
movement till the record date. based on ones assumption take the necessary
position (share qty)
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Thanks for this clarification.
I have another silly question - If I meet all the criteria on the record date, Infy will automatically buy back the stocks without me having to indicate that I want them to do so? or do I need to request somewhere to let them know that I am interested in buyback?
Indeed silly question but valid one 
. You have to tender your shares during buyback window period which will be announced soon after required regulator clearance.