Bajaj Auto’s board has given the green light to a massive buyback Rs 4,000 crore share at a substantial price of Rs 10,000 per share, marking a 43% premium over the last closing price of January 8.
The company plans to repurchase 40 lakh shares via the tender route, equivalent to 1.41 percent of Bajaj Auto’s outstanding shares. Notably, the promoters, holding a 54.94 percent stake in the company, will actively participate in this buyback initiative.
To facilitate the process, a Buyback Committee has been constituted by the Board, with the authority to undertake all necessary actions related to the buyback at its discretion. The proposal is contingent upon the approval of shareholders through a special resolution via a postal ballot, with specific details and record dates to be disclosed later.
This marks Bajaj Auto’s second share buyback in as many years, following a Rs 2,500 crore buyback in July 2022 at Rs 4,600 per unit. Managing Director Rajiv Bajaj anticipates this buyback to be more substantial, projecting a cash balance of Rs 20,000 crore by the end of the fiscal year 2024. He expressed confidence in the company’s performance, highlighting an excellent 2023.
In July 2022, the two-wheeler manufacturer executed a share buyback amounting to Rs 2,500 crore, acquiring shares at Rs 4,600 each. The recent surge in stock value reflects positive market sentiment and investor confidence following the announcement of the upcoming share buyback.
“The proposed buyback price, set at a significant premium over the current market price, indicates a strong message of value from the company’s perspective. This premium often leads to a positive sentiment among investors, potentially driving up the market price in the short term. For retail investors, this could mean an attractive exit point or an opportunity for capital gains, especially for those who have been holding shares for a longer period,” said Sonam Srivastava, Founder and Fund Manager at Wright Research.
Srivastava also says that, the buyback also tends to reduce the number of shares in circulation, which might lead to a higher earnings per share (EPS) ratio, further bolstering the stock’s attractiveness. Overall, the buyback announcement is poised to create a ripple effect in the market, influencing not just Bajaj Auto’s stock but also potentially impacting the broader sector or market indices it’s part of.
Stock Performance of Bajaj Auto in past few years.
On January 8, Bajaj Auto’s stock closed at Rs 6,980, nearly unchanged from the previous close, outperforming the Nifty50 benchmark, which experienced a 1 percent decline. Since the buyback announcement, the stock has witnessed a nearly 5 percent gain. Over the past year, it has surged by an impressive 93 percent, securing the second-best performer position on the index after Tata Motors.
In the last week, the stock has surged over 8%, while over the one-month and six-month periods, gains stand at 16.27% and 45.72%, respectively. Year-to-date returns are at 6%, buy the stock has delivered an astonishing 97.56% return over the last 12 months.