KRBL share buyback: Should you tender shares in the buyback? Here's what experts say

KRBL on Monday (August 28) informed stock exchanges about the share buyback. The ₹325 crore share buyback of KRBL opened on Thursday (August 31) and it will remain open till Wednesday (September 6, 2023).

In an exchange filing, the company said it would buy back up to 65 lakh fully paid-up equity shares of ₹1 each of the company at a price of ₹500 per equity share for a maximum amount of ₹325 crore through the tender offer process. August 25 was the record date for the purpose.

"Eligible shareholders can tender their equity shares in the buyback only during the tendering period, which commences on Thursday, August 31, 2023, and ends on Wednesday, September 6, 2023," KRBL said in a BSE filing.

Eligible shareholders can only participate in the buyback by placing a bid through a stock broker registered with BSE.

The company said the buyback will help it distribute surplus cash to its shareholders holding equity shares, thereby enhancing the overall return for them.

Important details of KRBL share buyback

(1) KRBL share buyback price: The company has fixed the share buyback price at ₹500 per share.

(2) KRBL share buyback date: The buyback offer opened today and it will remain open for eligible shareholders of the company till September 6, 2023.

(3) KRBL share buyback eligibility: The record date for the buyback was on August 25, 2023. This means those who held KRBL shares on August 25, 2023, are eligible for this buyback offer.

(4) KRBL share buyback at a premium: KRBL share price closed at ₹398.05 on BSE on August 25. As the company has fixed the share buyback price at ₹500 per share, this share buyback price represents a 25.6 per cent premium over the stock's record date closing price.

Should you tender shares?

Analysts are divided in their views on whether investors should tender their shares in KRBL share buyback or not. While some believe the attractive premium could be an opportunity for retail investors to make some profit, some remain optimistic about the company's long-term growth prospects and hence advise holding the shares.

Prashanth Tapse, Senior VP - Research at Mehta Equities pointed out that despite the size of the offer, the company has attempted to restore investor confidence by providing them with a good buyback.

"The buyback is generally expected to improve return on equity through the distribution of cash and improve earnings per share by the reduction in the equity base of the company, thereby leading to a long-term increase in shareholders' value. Hence, we recommend retail investors to tender shares in the buyback programme and make best use of the premium offer," said Tapse.

On the other hand, Parth Shah, a research analyst at StoxBox believes investors should not tender their shares in the buyback despite lucrative premiums being offered.

"With KRBL buyback opening today at a price of ₹500 per share, we advise investors not to tender shares in the programme despite it offering a lucrative 27 per cent premium over the record date as we remain positive on the company’s growth prospects," said Shah.

"With the entitlement ratio for small shareholders close to 17.5 per cent, an acceptance of 100 per cent will still result in a small profit. We remain positive on the company’s growth trajectory along favourable industry trends in the form of higher overall rice prices," Shah said.

The company’s domestic as well as export business is performing well along with strong expansion plans in Gujarat, Karnataka and Madhya Pradesh.

Shah believes that the company’s focus on diversifying beyond just basmati rice and scaling up the distribution network will result in improved performance going forward.

Siddhesh Mehta, a research analyst at SAMCO Securities underscored that KRBL has demonstrated consistent growth, and has achieved remarkable milestones over the past five years, with FY23 witnessing its highest revenues, EBITDA, and PAT figures. The forthcoming reduction in outstanding shares post-buyback is anticipated to yield enhancements in return ratios and EPS (earnings per share) figures for the company.

"Amidst the prevailing market uncertainties, shareholders who aspire to capitalise on the current market dynamics might find it prudent to participate in the buyback offer by tendering their shares. Conversely, for those with a long-term investment horizon, it is recommended to retain their positions and remain invested," said Mehta of SAMCO Securities.

KRBL share price rose almost 3 per cent in intraday trade on BSE on Thursday. The stock opened at ₹402.25 against the previous close of ₹401 and rose 2.8 per cent to the intraday high of ₹412.05 in Thursday's trade. The scrip closed 0.29 per cent up at ₹402.15 on BSE.

The stock hit its 52-week high of ₹449.40 on December 14, 2022. As of the August 31, 2023 close, the stock is down 10.5 per cent from its 52-week high level.

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Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.