BSE buyback: Should you tender your shares?

Given company's strong cash balance and prospects of robust growth, long-term investors can skip the share buyback, recommends A K Prabhakar.

The board of directors of BSE Ltd on Thursday approved a share buyback of up to Rs 375 crore via tender route at Rs 816 per share.

"The resultant equity shares to be bought back at the buyback offer price are 4,593,137 equity shares, representing 3.39 per cent of the total number of equity Shares in the total paid-up capital," BSE said.

The company has not announced the record date for the buyback programme.

This will be the third share repurchase by BSE, which is India's only listed equity bourse, since its listing in January 2017. READ MORE

About Tender Route offer

'Tender offer' means an offer by a company to buy-back its own shares or other specified securities through a letter of offer from the holders of the shares or other specified securities of the company.

BSE Share Buyback

As per the shareholding pattern at the end of FY22, retail investors approx. held 3.71 crore equity shares. Based on the Sebi rule of 15 per cent reservations for small investors (less than Rs 2 lakh) in a buyback offer, out of the total shareholding of retail investors, only up to 6.89 lakh shares will be accepted in buyback. 

Thus, implying an acceptance ratio of 1.9 per cent in the proposed buyback in case of 100 per cent retail participation. The actual per centage may vary based on the eventual participation.

In simpler terms, retail investors holding 105 shares and participating in the share buyback programme, will be able to tender only two shares based on the acceptance ratio. 

However, in case, an investor wants to invest now and then participate in the BSE share buyback. Here's how the equation may work out.

A K Prabhakar, head of research at IDBI Capital, recommends long-term investors can skip the buyback as the company's prospects remains robust. BSE holds around Rs 3,200 crore, which is more than 40 per cent of the company's market capitalisation.

"Today with Star Mutual Fund (MF) platform BSE is number aggregator for collection for orders from MF distributors. Further, the exchange is also may progress and exploring more opportunities in the F&O segment. Given the fact there are only two exchanges in India, the whole business and growth will be reaped by both", Prabhakar adds.