Dear Members,
We have released 1st Sep’25: Special situation opportunity on the proposed buy-back of shares of Bajaj Consumer Ltd. The same has also been produced below. For details and other updates, please log into the website at the following link – http://katalystwealth.com/index.php/my-account/
Note: For any queries, mail us at [email protected]
Date: 1st Sep’25
CMP – 238.45 (BSE); 238.42 (NSE)
Rating – Positive; this is not an investment advice (refer rating interpretation at the end)
Note:
- In general, the acceptance ratio in buy-back opportunities is higher if you fall into the small shareholder category, i.e. have holding value less than Rs 2 lakh in the stock as on the record date.
- The gross proceeds from buy-back are treated as dividends and taxed in the hands of the shareholders. While the original cost of the shares is treated as a capital loss in the hands of the shareholders. Thus, buy-backs might be more suitable for investors who fall into lower tax slabs of 5-15%. It will be important for investors to individually assess the impact of the same.
Bajaj Consumer (NSE – BAJAJCON) buy-back offer
On 24th Juy’25, the Board of Directors of Bajaj Consumer Care Ltd approved a buy-back of
64,34,482 shares at a price of Rs 290/- per share from all the existing shareholders of the company as on the record date, on a proportionate basis through “Tender Offer” route.
The promoters have expressed their intention not to participate in the buy-back.
The shareholders have approved the buy-back resolution. The ex-date for the buy-back offer is yet to be announced.
Rationale behind this opportunity
It is important to note here that Buy-Back through tender offer route is like Open Offer in many aspects as against Buy-back through open market purchases.
In buy-back through tender offer route all the shareholders can participate (including the promoters), and the buyback is on proportionate basis from all the shareholders of the company.
Considering Bajaj Consumer has 13.70 crore shares listed, and the buyback is only for 0.64 crore shares, theoretically only 5 share out of 100 shares (5% acceptance ratio) should get accepted at 290/- per share if all the shareholders participate in the tender offer and 95 shares will be returned.
However, there are a few important regulations regarding buy-back through tender offer route which increases the acceptance ratio in the case of Bajaj Consumer. They are:
- 15% of the number of Equity Shares which the Company proposes to buyback or number of Equity Shares entitled as per the shareholding of small shareholders, whichever is higher, shall be reserved for the small shareholders as part of this Buyback.
- Small Shareholder is a shareholder who holds equity shares having market value, based on closing price on recognized exchanges as on Record Date of buy-back, of not more than Rs 200,000 (2 lakhs).
Based on the above regulations, out of 64,34,482 shares, 9,65,172 shares will be reserved for the small shareholders.
The small shareholder will be the one with less than 830 shares (based on 1st Sep’25 prices). Actual quantity will be known based on the stock price on the record date.
Shareholding distribution
Source: Bajaj Consumer AR 25
If we look at the shareholding distribution of the company as on 31st Mar’25, there were around 2 crore shares with the shareholders holding shares in the range of 1-5,000.
The company came out with the tender based buy-back offer in Jul’24 as well.
In the Jul’24 buyback, the offer size was marginally smaller at 57.41 lakh shares and buy-back price of 290/- per share. Then there were around 1.13 crore shares with the small shareholders and only 15.44 lakh shares got tendered in the small shareholders category against the reserved quota of 8.61 lakh shares (15% of 57.41 lakh shares).
During the buy-back window, the stock was quoting in the range of 260-270 against the buy-back price of 290 and the stock had not crossed the high of 290 since Jul’21. Yet, the tendering was low at only 15.44 lakh shares against the total of 1.13 crore shares with the small shareholders.
This time, we believe the tendering might be similar as last year as there’s been no major change in price range and shareholding pattern.
So, even if 20 lakh shares (last year 15.44 lakh shares got tendered) get tendered, the acceptance ratio will be around 48%.
Some Estimates
Let’s work with some estimates:
Cost of 100 shares – 238.45 * 100 = 23,845
Cost of residual shares based on various acceptance scenarios, i.e., the number of shares that get accepted at Rs 290.
| Acceptance Ratio | Cost of Residual Shares |
| 40% | 204.08 |
| 50% | 186.90 |
| 60% | 161.12 |
We believe ~50% acceptance is quite probable; anything, above that will be a bonus. So, in the case of 50% acceptance, one starts losing money only when the stock starts falling below 187 odd levels.
In the Mar’25 correction, the stock recorded a low of around 160.
Risks/concerns
Taxation changes on buy-back – The Finance Act, 2024, changed the mechanism of taxation of buyback transactions. Instead of a buyback distribution tax paid by the company, from 1st Oct’24 – the gross proceeds on buy back are treated as dividends and taxed in the hands of the shareholders. While the original cost of the shares is treated as a capital loss in the hands of the shareholders. It is to be adjusted against other capital gains either in the same year or as a set-off over the subsequent 8 years. It will be important for investors to individually assess the impact of the same.
The actual ratio will be known only once the entire process is over and in case of lower acceptance ratio our returns will diminish.
The timeline for this opportunity is around 2-3 months and therefore in the interim if the market corrects in a major way the exit price for the unaccepted shares will get impacted.
Buy-backs are widely tracked these days and therefore our assumption of minimum 40-60% acceptance may not hold true.
Disclosure: I do not have any holding in Bajaj Consumer.
Best Regards,
Ekansh Mittal
Research Analyst
http://www.katalystwealth.com
Ph.: +91-727-5050062, Mob: +91-9818866676
Email: [email protected]
Rating Interpretation
Positive – Expected return of ~15% + on annualized basis in medium to long term for investment recommendations and in short term for Special situations
Neutral – Expected Absolute return in the range of +/- 15%
Negative – Expected Absolute return of over -15%
Coverage closure – No further update on the stock
% weightage – This is based on our 20-25 stocks investment philosophy. Members are free to make allocation of their choice (if you invest) or consult their Investment Advisor for the same
Short term – Less than 1 year
Medium term – Greater than 1 year and less than 3 years
Long term – Greater than 3 years
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Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Analyst ownership of the stock: No
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