Jagran Prakashan Buyback 2018- A Bitter Pill for Arbitrageurs

Jagran Prakashan Buyback
Jagran Prakashan came out with a Buyback of  up to 1.5 Crore equity shares of Face Value of INR 2, amounting to Rs. 292.5 Crore and the buyback closed in end July 2018. The Jagran Prakashan Buyback of shares constituted 4.82% of its subscribed paid up share capital. The offer which was through the ‘Tender Route’ was open from Jul 10, 2018 to Jul 23, 2018 and has concluded. The Buyback price was fixed at Rs. 195 which was at 18.7% premium to prevailing price on the day of Board meeting.  The earlier issue of Jagran Prakashan in 2017 had resulted in 100% acceptance ratio for buyback from retail resulting in fantastic returns. However this time the Jagran Prakashan Buyback ended in losses for those seeking arbitrage opportunity, had an devastating effect on the Jagran Prakashan share price  and may have a negative impact on share price for quite some time to come.

About Jagran Prakashan

Jagran Prakashan areas of operation are mainly in printing and publication of newspapers & magazines, FM Radio and to a lesser extent
Digital,Outdoor Advertising and Promotional marketing/Event management. The Group publishes 8 newspapers and 2 magazines
from 37 different printing facilities across 13 states in 5 different languages. Jagran Prakashan owns well known newspapers– Dainik Jagran, Mid-Day and Nai Dunia and also FM Radio brand Radio City.

Jagran Prakashan Buyback offer 2018 (Completed)

  • On 17/04/18, Jagran Prakashan indicated its intent to go for a share Buyback. The stock was ruling at Rs. 167.5.
  • on 26/04/18, the Board meeting decided for a tender route for buyback of 1.5 Crore equity shares of Face Value of INR 2, amounting to Rs. 292.5 Crore. The Buyback price was fixed at Rs. 195 which was at 18.7% premium to prevailing price on the day of Board meeting.
  • The record date for Jagran Prakashan Buyback was fixed at 15/6/2018. The  scrip ruled at 159.35 a day before the RD  having touched a high of Rs. 174.45 in the intervening period. After the Record date the scrip fell to 146.5.
  • The Jagran Prakashan Buyback opened from  July 10, 2018  to July 23, 2018
  • The Shareholders entitlement indicated in the buyback letter was 20%. This led to further fall in share price which came to about  Rs. 138.3
  •  Finally   in the Retail category, buyback bids were received from 12809 investors for 7,134,786  shares against the Retail portion of  2,250,000 resulting in 317% oversubscription of the retail. Thus the buyback acceptance ratio worked out to be 30.47%.
  • It is estimated that about 6000 new short term  investors may have bought Jagran Prakashan shares to almost their full capacity to participate in the Jagran Prakashan Buyback. This alone was sufficient to exceed the buyback quota by at least 1.5 times. This coupled with a already existing reasonable retail base  and increased participation of existing  investors in the buyback offer and also tendency to tender the shares due to unfavorable headwinds for midcaps in the bourses, led to substantial tendering of shares.
  • The investors for instance who bought the maximum permissible scrips peritted in retail category (1025 shates) for a consideration of Rs. ~1.69 Lac , finally  ended up realizing Rs. ~ 1.46 Lac as a combined result of Buyback of accepted shares at Rs. 195 and sale of remaining shares on receipt at market price. Thus such investor ended with a loss of Rs. 23,000 which amounts to absolute loss of 13.6% in a three month period.
  • The consequential damage to Jagran Prakashan share from this Jagran Prakashan Buyback buyback has been tremendous. It used to rule at 160-170 levels even before the buyback. Even an inline Q1Fy19 results  announced after the buyback have not been able to bring a bounce in the share and the scrip continues to be valued rather poorly.
  • Above Jagran Prakashan Buyback analysis is to bring forth the facts and caution an investor that every buyback may not be profitable and can turn bitter too and more so when mid caps are involved which are already in firing line at the exchanges.  Further past trends like 100% acceptance ratio in 2017 buyback should not be used as the basis as investors are now more aware, there is increase in number of arbitrageurs and there is more profit booking tendency at this juncture in the stock markets leading to higher tendering of shares.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.


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