Widely read:
Bajaj Auto , one of India's leading two-wheeler manufacturers, has announced its plans to buy back shares worth Rs 4,000 crore. The buyback will be executed through the tender offer route at Rs 10,000 per share, a 43 per cent premium to the closing price of the stock on January 8, 2024. Consequently, the share price of Bajaj Auto surged 2 per cent on January 9, 2024.
Notably, promoters and members of the promoter group will partake in the buyback. The management has yet to announce a specific timeline for the buyback process.
What it means for the company
The two-wheeler manufacturer plans to purchase up to 40 lakh shares, around 1.41 per cent of the total outstanding shares as of January 5, 2024.
The proposed buyback will be financed through internal accruals, including the sale of investment. As of September 2023, the company has cash and current investments of Rs 5,473 crore
Company overview
Bajaj Auto, the flagship company of the Bajaj group, is one of India's leading two- and three-wheeler manufacturers. It commands more than 70 per cent market share in the three-wheeler and passenger carriers segments. Also, it had a 17 per cent market share in domestic two-wheelers in FY23. Furthermore, it has a significant presence in overseas markets, accounting for about 41 per cent of FY23 revenue.
Here's how the company has performed in the recent past.
Financial performance
| Particulars | TTM | FY23 | FY22 | FY21 | FY20 | 3Y growth (%) |
|---|---|---|---|---|---|---|
| Revenue (Rs cr) | 37,030 | 36,455 | 33,145 | 27,741 | 29,919 | 6.8 |
| Operating profit (Rs cr) | 6,802 | 6,449 | 5,228 | 4,919 | 5,096 | 8.2 |
| Operating profit margin (%) | 18.4 | 17.7 | 15.8 | 17.7 | 17 | |
| PAT (Rs cr) | 6,366 | 6,060 | 6,166 | 4,857 | 5,212 | 5.2 |
| Sales volume | 22,54,950 | 38,90,824 | 43,00,122 | 39,71,531 | 46,14,058 | -5.5 |
Investors' corner
Buybacks are a tax-efficient means of rewarding shareholders, allowing them to exit at a premium to the market price. Additionally, shareholders opting to remain invested are rewarded with a higher share in the company's future profits, as the number of outstanding shares decreases post-buyback.
Therefore, investors and shareholders contemplating participation in the buyback should carefully weigh the company's potential for future growth and the offered premium.
Also, the above is not a stock recommendation. Please do the due diligence before investing.
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