On Thursday, oil marketing company Indian Oil announced a buyback of 3.06 per cent equity shares for a consideration not over Rs.4,435 crore at a price of Rs. 149 per share. At Friday's market closing hour, the share of IOC quoted at Rs. 141.45. The offer price for the buyback is 8.6% higher than the Thursday's closing price of Rs. 137.20 on the BSE.
For ascertaining the eligible investors who can participate in the buyback, the company has fixed the record date as December 25.
In a filing the company said, "Buyback of equity shares of the company not exceeding 29,76,51,006 equity shares being approximately 3.06 per cent .. of the total paidup equity share capital of the company at a price of Rs 149 per equity share payable in cash for an aggregate consideration not exceeding Rs 4,435 crore" .
At a closing price of Rs. 137, investors with IOC shares worth Rs. 1.84 lakh or 1342 equity shares will be deemed as retail investors who can buyback.
The company also reiterated that for the FY 2018-19, the OMC has declared an interim dividend of Rs. 6.75 per share. And the money will be credited to the investor's account on or before December 31.
It is to be noted that the government holds a majority stake in the company at 54.06% and will be participating in the offer.
Should you tender your held IOC shares?
So, considering different acceptance ratio, we will make out what will be the likely reward for retail investors. For the government, IOC buyback means windfall gains.
Say, when the acceptance ratio by the company is 33%, of the 1342 shares that qualify to be bought back, 442 shares will be bought back by the company and at a buyback price of Rs. 149 will provide an investor gains equal to Rs. 5304, Rs. 65,858 less Thursday's price of Rs. 60,554.
Further if the acceptance ratio is 50%, 75% and 100%, you will be able to realize a buyback profit of Rs. 8052, Rs. 12,072 and Rs. 16,104. So, depending on the acceptance ratio, you will be definitely earn profit from the offer.
And also as the portion fixed for the retail participation is pegged at 15% considering if all of the retail participants tender their shares, the acceptance ratio will be 53.6%. But as only a small portion participate, acceptance ratio by the company can go as high as 88%. So without a second thought you can tender the shares of IOC, plus dividend benfit is another good with the shares of IOC.