eClerx Services Ltd. had informed that the meeting of the Board of Directors of the Company is scheduled on 14/03/2019 ,inter alia, to consider and approve Buyback of shares. eClerx Buyback approved by its Board on 14-03-19 comprises buyback for an aggregate amount not exceeding Rs. 262 crore, at a maximum price of Rs. 1,600 (Maximum Buy-Back Price’) from the existing equity shareholders of the Company i.e. up to 63,63,636 Equity Shares of the Company. eClerx Buyback represents approximately 4.23 % of the total paid-up equity capital of the Company and is on a proportionate basis under “Tender Offer” route.
eClerx Buyback Updates
- Acceptance 18.75%
- eClerx Buyback Issue 31-05:14-06-19
- eClerx Buyback Entitlement 13.26%
- eClerx Buyback Price now fixed at Rs 1500 in place of Rs. 1600 earlier.
- eClerx Buyback RD 10-05-19
eClerx Buyback 2019 & 2017 : Key Info
|Buy Back Price||1,500||2000|
|MP befo BM||1,026||1238.65|
|% Premium on MP||46.20%||61.47%|
|BuyBack Size- Rs. Cr||262.00||258|
|BuyBack Size- Shares||1,746,666||1,290,000|
|Tot No.of shares||38,711,095||39,919,082|
|Equity Capital- cr||38.71||39.919082|
|FV of Share in Rs.||10||10|
|Buy Back Issue date||31-05:14-06-19||19-01:02-02-18|
|Shares reserved- Retail||262,000||193500|
|Shareholders on RD||66509||34976|
|Shares on RD||1975851||1,513,267|
eClerx Buyback : Acceptance Ratio Possibilities:
This framework is based on estimation of shareholding of Eclerx Services shareholders who hold around 200 number of shares. To this we have added estimates for
1) Few additional purchase of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Shares by Arbitrage investors. 3) Data from Previous Buybacks
Based on approximations indicated above and considering a moderate tendering ratio, under normal circumstances Eclerx Services Buyback could have acceptance ratio of 20-40 %, a figure that will depend significantly on new arbitrage investors who buy into the stock.
Return Scenarios: eClerx Buyback
The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback. Investors may kept in mind that stock markets are quite volatile at this juncture and there are many political and other uncertainties related to international markets. We have depicted some scenarios for Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
|MP Aft Buybk|
This post is purely for informative and educational purpose and is in no way suggestive of taking any position in the counter. Profit or Loss in any buy sell operation in stocks is associated with significant risk of capital loss. For more on Buyback Benefits and other issues please refer the earlier Posts.
About eClerx Services
- eClerx Services Limited (“eClerx”) was founded in 2000 and is is a leading knowledge process outsourcing (“KPO”) company.
- eClerx Services provides Operations services to more than 30+ global Fortune 500 clients, including many of the world’s leading financial Services firms, online retail and distributors, interactive media, luxury brands and entertainment, high tech and industrial manufacturing, travel and leisure, and software vendors, through operational support, data, management and analytics solutions.
- The Company was ranked as one of Forbes Asia’s 200 Best Under a Billion List and named as finalist in Teleos’ Most Admired Knowledge Enterprise award.
- eClerx Services employs over 8,800 employees across its global delivery centers and offices in Verona, Phuket, Mumbai, Pune and Chandigarh plus global client relationship locations in New York, London, Philadelphia, Silicon Valley, Austin, Dublin, Milan, Hamburg and Singapore.
- Mr. PD Mundhra and Mr. Anjan Malik are majority shareholders in eClerx
eClerx Services: Price Trend, Summary of Financials
|Market Cap in Rs. Cr||4,264|
|Revenue FY18 in cr||1,144|
|CMP in Rs.||1,102 (13-03-19)|
|Price / Earning (PE)||20.59|
|Price / BV||3.89|
|Sales 3 yr CAGR||11.81%|
|Debt / Equity Ratio||0|
|52 week High/Low||1396.00 / 958.00|
Assessment: eClerx Buyback
- eClerx reported a very weak Q3FY19 with inline revenues but EBITDA margins declined by 460 bps QoQ. Dollar revenues increased marginally by 0.4% on a sequential basis
- On account of certain change in its operating model viz. shift to onshore/managed service, EBITDA margins have seen a downward trend from above 30% to 20%
- eClerx Services which is a mid cap IT company is virtually Debt free
- eClerx Buyback price is at a good premium to existing market price and is in line or better than similar buybacks by company in the past.
- eClerx Services has a good return on equity (ROE) with three year ROE at 31.12% .
- eClerx has Strong cash position and high payout which provides some cushion to the downside. However weak operating performance may continue to weigh upon the stock price performance.
- Considering the size of issue the company has to go for a postal ballot to seek share holders approval and hence the total time period may amount to 3-4 months.
- Unless there is a improvement in operating metrics of company / market sentiment , the returns from Buyback may not be attractive. However some returns may be possible if stock is accumulated on any declines.
- Results of FY 19 are expected before the completion of eClerx buyback and will influence the possible returns.
- There may be considerable volatility due to elections and actions of US Govt policies as well. This should be borne in mind by investors.
- eClerx Services is not in F&O which may keep stock under pressure post buyback.
Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk. Further the data in the post is prone to errors.