Just Dial Limited – Tender Offer

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SUMMARY
POTENTIAL BUYBACK ANNOUNCEMENT
On June 1, 2015, Just Dial Limited (NSEI:JUSTDIAL) announced that it intends to initiate an equity buyback on June 4, 2015. The Company’s Board of Directors will consider a share repurchase program under which, the company will buyback its own shares.

Share Price = INR 1135.55

At the time of potential buyback announcement, the terms of buyback i.e. mode of buyback (tender offer vs. open market repurchase), buyback price and size of buyback are unknown.

TENDER OFFER ANNOUNCEMENT
On June 4, 2015, Just Dial Limited (NSEI:JUSTDIAL) announced a tender offer to buyback 1.06 million shares at a buyback price of INR 1550.00 per share. This represents a spread of 39.7% over the market price of INR 1109.65 per share, as of the announcement date. The proposed buyback shares represents 1.51% of the total outstanding shares of 70.49 million. Given SEBI’s rule of preference to small shareholders who own less than INR 2 lakh worth of shares of the Company, approximately 0.16 million shares are reserved for small shareholders, which represents 15% of the proposed buyback.

Features – Tender Offer – Fixed Price
Share Price = INR 1109.65
Buyback Price = INR 1550.00
Spread = 39.7%
Buyback Size = 1.5% or 1.06 million shares

RECORD DATE ANNOUNCEMENT
The Company has fixed the record date of December 4, 2015 for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

BUYBACK DATES ANNOUNCEMENT
The Company has announced the buyback open and close dates to participate in this tender offer. The buyback window for putting instructions opens on February 25, 2016 and closes on March 10, 2016.

RISK-REWARD ANALYSIS
ANALYSIS AS OF TENDER OFFER ANNOUNCEMENT DATE
Share Price = INR 1109.65

Based on our research and analysis, the acceptance rate of this tender offer for small shareholders is expected to fall in the 10%-35% range. At the current price level, this represents an expected return between 4.0% and 13.9%. If the share price drops by 5%, the expected return would be between -0.5% and 10.6%. If the share price increases by 5%, the expected return would be between 8.5% and 17.1%. At 100% acceptance rate, the maximum return would be around 39.7%.
Based on the above risk-reward ratio analysis, Just Dial Limited tender offer appears to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = INVEST

ANALYSIS AS OF 3 DAYS PRIOR TO RECORD DATE
Share Price = INR 927.40

At the current price level and above mentioned acceptance rates, an expected return is between 6.7% and 23.5%. If the share price drops by 5%, the expected return would be between 2.2% and 20.2%. If the share price increases by 5%, the expected return would be between 11.2% and 26.7%. At 100% acceptance rate, the maximum return would be around 67.1%.
Based on the above risk-reward ratio analysis, Just Dial Limited tender offer continue to appear to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = STAY INVESTED

ANALYSIS AS OF BUYBACK OPEN DATE
Share Price = INR 535.05

At the current price level and above mentioned acceptance rates, an expected return is between 19.0% and 66.4%. If the share price drops by 5%, the expected return would be between 14.5% and 63.1%. If the share price increases by 5%, the expected return would be between 23.5% and 69.6%.
Based on the above risk-reward ratio analysis, Just Dial Limited tender offer continue to appear to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = PARTICIPATE

POST-BUYBACK ANNOUNCEMENT & RESULT
On March 10, 2016, Just Dial Limited (NSEI:JUSTDIAL) announced the final results of the buyback. A total of 0.52 million shares were tendered by small shareholders, out of which 0.16 million shares were accepted. Therefore, the actual acceptance rate for small shareholders turned out to be approximately 30%. The share price decreased by 38.9% since tender offer announcement, which includes 25.7% decrease between the tender offer announcement and record date, and 13.2% decrease between the record date and closing date. Further, the Company paid a dividend of INR 2.00 per share between the tender offer announcement and closing date, which implies a dividend yield of 0.2%.

Share Price = INR 678.15

Given we decided to INVEST at the time of tender offer announcement, decided to STAY INVESTED at the time of record date and decided to PARTICIPATE at the time of buyback open date, the net realized return was -14.8% over a span of 280 days, which is equivalent to an annualized return of -18.9%.

RESULT = LOSS
RETURN = -14.8%
DURATION = 280 days
ANNUALIZED IRR = -18.9%

REFERENCE LINKS/FILINGS

Tender Offer Announcement
Record Date Announcement
Buyback Dates Announcement
Post Buyback Announcement

DISCLAIMER & DISCLOSURE
The above post/article should not be considered as a stock recommendation or trading/investing advice in any way. The stock analysis is based on the information publicly available to author, however readers should check the original source of information. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion. At the time of writing this post author may have a financial interest or ownership in the discussed stock or initiate a position anytime in future.