Netlink Solutions (India) Limited – Tender Offer

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SUMMARY
POTENTIAL BUYBACK ANNOUNCEMENT
On January 24, 2018, Netlink Solutions (India) Limited (BSE:509040) announced that it intends to initiate an equity buyback. The Company’s Board of Directors will consider a share repurchase program under which, the company will buyback its own shares.

Share Price = INR 6.95

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 February 9, 2018, Netlink Solutions (India) Limited (BSE:509040) announced a tender offer to buyback 0.74 million shares at a buyback price of ₹ 17.00 per share. This represents a spread of 144.6% over the market price of ₹ 6.95 per share, as of the announcement date. The proposed buyback shares represents 25.00% of the total outstanding shares of 2.97 million. Given SEBI’s rule of preference to small shareholders who own less than ₹ 0.2 million worth of shares of the Company, approximately 0.11 million shares are reserved for small shareholders, which represents 15% of the proposed buyback.

Features – Tender Offer – Fixed Price
Share Price = INR 6.95
Buyback Price = INR 17.00
Spread = 144.6%
Buyback Size = 25.0% or 0.74 million shares

RECORD DATE ANNOUNCEMENT
The Company has fixed the record date of May 21, 2018 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 June 19, 2018 and closes on July 2, 2018.

RISK-REWARD ANALYSIS
ANALYSIS AS OF TENDER OFFER ANNOUNCEMENT DATE
Share Price = INR 6.95

Based on our research and analysis, the acceptance rate of this tender offer for small shareholders is expected to fall in the 60%-100% range. At the current price level, this represents an expected return between 86.8% and 144.6%. If the share price drops by 5%, the expected return would be between 84.8% and 144.6%. If the share price increases by 5%, the expected return would be between 88.8% and 144.6%. At 100% acceptance rate, the maximum return would be around 144.6%.
Based on the above risk-reward ratio analysis, Netlink Solutions (India) 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 9.14

At the current price level and above mentioned acceptance rates, an expected return is between 51.6% and 86.0%. If the share price drops by 5%, the expected return would be between 49.6% and 86.0%. If the share price increases by 5%, the expected return would be between 53.6% and 86.0%. At 100% acceptance rate, the maximum return would be around 86.0%.
Based on the above risk-reward ratio analysis, Netlink Solutions (India) 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 10.62

At the current price level and above mentioned acceptance rates, an expected return is between 36.0% and 60.1%. If the share price drops by 5%, the expected return would be between 34.0% and 60.1%. If the share price increases by 5%, the expected return would be between 38.0% and 60.1%.
Based on the above risk-reward ratio analysis, Netlink Solutions (India) Limited tender offer continue to appear to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = PARTICIPATE

POST-BUYBACK ANNOUNCEMENT & RESULT
On July 2, 2018, Netlink Solutions (India) Limited (BSE:509040) announced the final results of the buyback. A total of 0.17 million shares were tendered by small shareholders, out of which 0.11 million shares were accepted. Therefore, the actual acceptance rate for small shareholders turned out to be approximately 65%. The share price increased by 41.7% since the tender offer announcement, which includes 51.9% increase between the tender offer announcement and record date, and 10.2% decrease between the record date and closing date.

Share Price = INR 9.85

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 109.1% over a span of 143 days, which is equivalent to an annualized return of 556.9%.

RESULT = PROFIT
RETURN = 109.1%
DURATION = 143 days
ANNUALIZED IRR = 556.9%

REFERENCE LINKS/FILINGS
Potential Buyback Announcement
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.