Earlier last week, the company announced the plan to buy back 54.23 lakh shares, representing about 0.93% of its total outstanding shares, worth up to Rs 800 crore through the tender offer route, with the offer set to open on April 23 and close on April 29, with the buyback price fixed at Rs 1,475 per share. This implies a premium of more than 4% over the stock’s previous closing price of Rs 1,413.80 apiece.
Under the buyback entitlement structure, small shareholders have been allotted a relatively higher acceptance ratio. Investors in the reserved category are entitled to 7 shares for every 61 shares held, while those in the general category are eligible for 2 shares for every 249 shares held. This structure aims to provide better participation for retail investors, although final acceptance will depend on overall subscription levels.
Should you tender shares?
Aurobindo Pharma’s is more a capital-allocation event than a game-changing rerating trigger, said Harshal Dasani, Business Head at INVasset PMS. He noted that the key difference lies in category-wise entitlement – small shareholders have an indicative entitlement of 7 shares for every 61 held on the April 17 record date, or about 11.47%, while the general category gets only 2 shares for every 249 held, or roughly 0.80%.
“Small shareholders should seriously consider tendering, especially if they want to lock in gains, because the assured entitlement is meaningful and any additional acceptance is a bonus. For general-category investors, the economics are less compelling; the premium is thin and acceptance could be very low, so tendering makes sense only if you are neutral on the stock or want partial liquidity,” the analyst said.
He added that if an investor remains constructive on Aurobindo’s medium-term business, a more sensible approach is to tender only the entitled quantity and retain the balance, while keeping the latest buyback taxation rules in mind.
The record date for determining eligible shareholders was set on April 17, with the letter of offer dispatched to shareholders on April 21. Hence, all shareholders who owned the shares of the company as on the record date are eligible to participate in the company’s share buyback.
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