JB Chemicals & Pharmaceuticals Ltd informed on 23/08/18 that a meeting of the Board of Directors of the Company is scheduled on August 31, 2018 at which the Board will consider the proposal for Buy-back of fully paid-up Equity Shares by the Company. JB Chemicals buyback has been approved by Board of Directors on 31/08/18 for an amount of Rs. 130 crores at a buy back price of Rs. 390 through the tender route. This is at 15.2% premium to yesterdays closing price of Rs. 338.5 and the buyback of 33.33.333 shares represents 3.99% of the share capital. J.B.Chemicals & Pharmaceuticals Ltd.(JBCPL) is an Indian pharmaceutical company catering to domestic and International markets. JBCPL is also known as Unique Pharmaceutical Laboratories which is a division of JBCPL. JBCPL exports to over 30 countries across the world and earns more than half its revenue from exports. The Company is ranked 37th in the domestic Industry with Company’s four brands viz., Rantac (anti-peptic ulcerant), Metrogyl (amoebicides), Cilacar (calcium channel blocker) and Nicardia (calcium channel blocker) featuring in top 200 brands. Just after the announcement of its intention to go for buyback, the stock traded higher hitting a high of Rs. 338 and closing the day with about 7% gain at Rs 325.5 on the NSE with about 10x volumes
Latest Updates
- JB Chemicals Buyback issue to open from 10/10/18 to 24/10/18. See table for entitlement ratio.
- RD for JB Chemicals buyback is 12/09/18.
- 31/8/18: Board approved Buyback for 130 crores at max. price of Rs. 130/- through Tender Route
- 31/08/18 Record date to determine entitlement to participate in the proposed offer is 12 Sept
JB Chemicals Buyback 2018 and 2017
Particular / Year | Present Buy Back | Previous Buyback |
|---|---|---|
| Buy Back Board Meeting | 31-08-18 | 25-05-17 |
| Buy Back Type | Tender Offer | Tender Offer |
| Buy Back Price | 390 | 400 |
| Market Price before Board meeting | 338.3 | 103.25 |
| Market Price a day after Board meeting | 340 | 106 |
| % Premium on Market Price | 15.28% | 287.41% |
| Buy Back Size in Rs. Crore | 130.00 | 50.00 |
| Buy Back Size ( Shares) | 3,333,333 | 1,250,000 |
| Equity Capital in crore | 16.71 | 16.964 |
| Number of shares | 83,550,000 | 84,820,000 |
| Face Value of Share in Rs. | 2 | 2 |
| % Buyback | 3.99% | 1.47% |
| Record Date | 12-09-18 | 02-06-17 |
| Market Price as on RD for buyback | 342.4 | |
| Buy Back Issue date | 10-10: 24-10-18 | 03-07 to 14-07-17 |
| Buyback Shares reserved for Retail | 500,000 | 187,500 |
| No. of Retail investors on RD for Buyback | 29,248 | 28,710 |
| No. of Retail Shares on RD for Buyback | 4,238,965 | 4872664 |
| Buyback Entitlement | 11.80% | 3.85% |
| retail Shareholders who bid | 7187 | 3773 |
| Shares Tendered by retail | 1290211 | 898015 |
| Tendering Ratio | 30.44% | 18.43% |
| Overall Retail Aceeptance** | 38.75% | 20.88% |
| Actual Retail Acceptance | 40.12% |
JB Chemicals Buyback 2018
The Board meeting on 31/08/18 approved:
1. Tender Route for Buyback of 130 crores i.e. 33,33,3333 shares
2. Fixed Rs. 390 as buyback Price
3. Amounts to 3.99% of Share capital
4. Buyback Price is at 15.2% premium to yesterday’s price of Rs. 338.5
For a understanding of complete BuyBack Process & Terms, please see the link Buyback of Shares: A Primer for Retail Investors
JB Chemicals Buyback: A Framework to Estimate Acceptance Ratio:
This framework has been explained in earlier posts on Buybacks. Being a small issue the number of new investors who flock in to take advantage of arbitrage could greatly alter the final acceptance ratio as JB Chemicals Buyback is not a very large one compared to IT Companies. In normal circumstances, JB Chemicals Buyback could have a acceptance ratio in 15-30% band. In the last buyback acceptance ratio was 20% but size of issue was small at 50 crores.
CrossTablualtion Indicating Estimated Returns(Just Possibilities)
The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Acceptance Ratio and Price Post Buyback. JB chemcials has also run up in the days ahead of Board meeting by as much as 10% and hence expectation about Returns/Losses should take this into account. We have depicted the estimated Returns as a cross tabulation showing Absolute Returns as a function of various possible combinations of Acceptance Ratios and Price Post Buyback. These are estimates only.
Shares Purchased | 500 | Nos. | ||
|---|---|---|---|---|
| Share Buyback Price | 400 | |||
| Tabulation of Absolute Returns | ||||
| A) Based on Share Price when Posted | ||||
| JB Chem Share Purchase Price taken | 338.3 | Investment | 169150 | Rs. |
| Acceptance Ratio / Price Aft Buyback | 290 | 300 | 310 | 320 |
| 20% | -7.77% | -5.41% | -3.04% | -0.68% |
| 30% | -4.52% | -2.45% | -0.38% | 1.68% |
| 40% | -1.27% | 0.50% | 2.28% | 4.05% |
| B) Based on Actual acceptance | ||||
| Acceptance Ratio / Price Aft Buyback | 310 | |||
| 40% | 2.31% |
JB Chemicals Price Chart and Quarterly Performance:
Particulars | Jun-18 | Mar-18 | Dec-17 | Sep-17 | Jun-17 |
| Net Sales | 365.97 | 318.84 | 304.74 | 349.93 | 283.84 |
| Total Income | 367.09 | 329.94 | 310.06 | 356.89 | 293.11 |
| Total Expenditure | 291.87 | 279.14 | 246.13 | 273.55 | 252.77 |
| PBIDT | 75.22 | 50.79 | 63.93 | 83.34 | 40.34 |
| Interest | 1.27 | 0.95 | 0.61 | 1.06 | 0.79 |
| PBDT | 73.95 | 49.84 | 63.32 | 82.28 | 39.55 |
| Depreciation | 14.47 | 13.04 | 14.25 | 14.33 | 14.33 |
| Tax | 17.41 | 14.74 | 15.22 | 16.22 | 4.85 |
| Profit After Tax | 42.07 | 22.06 | 33.85 | 51.72 | 20.37 |
| Extra-ordinary Items | 0 | 0 | 0 | 0 | 0 |
| EPS | 5.03 | 2.63 | 4.03 | 6.11 | 2.32 |
| Equity | 16.96 | 16.71 | 16.96 | 16.96 | 16.96 |
| Face Value | 2 | 2 | 2 | 2 | 2 |
| PBIDTM(%) | 20.55 | 15.93 | 20.98 | 23.82 | 14.21 |
| PBDTM(%) | 20.21 | 15.63 | 20.78 | 23.51 | 13.93 |
| PATM(%) | 11.5 | 6.92 | 11.11 | 14.78 | 7.18 |
Some Observations (To be Updated with progress of Buyback):
- JB Chemicals Buyback has this time come with a higher issue size. 130 crore compared to 50 crore last year.
- Still JB Chemicals remain a small size issue and acceptance ratio last year was 20% which may hover the same mark due to increased awareness among investors and recent significant interest by investors with expectation of arbitrage gains in some similar opportunities.
- JB Chemicals recently got clearance for one of its manufacturing unit from FDA which is likely to support company price post JB Chemicals Buyback.
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.