My first post and I have a few fundamental questions.
To participate in the TCS buyback offer with Record Date Feb 23, my understanding is that to be considered a retail investor, one has to hold 44 shares (assuming the market price equals the buyback price of Rs.4500). My understanding is that 44 nos
is the maximum number of shares that a retail investor can hold as on record date.
My basic queries are:
Is there any minimum number of shares one has to hold to participate in the buyback? Can I hold 20 shares and still participate?
Can I hold 44 shares and offer all 44 back to TCS ?
Can I hold 100 shares and participate by offering only 44 of them ? (In this case, as I am holding more than 44, I cant be considered a retail investor, right? So the question is whether I can participate in buyback or not in the first place)
Before I go into answering your questions, first let’s clear some fundamentals about buyback. This buyback (and all other similar offer) are open for ALL investors of TCS who are shareholder as on 23 Feb.
So whether it is retail investor, institutional, HNI, Promoter, everyone is eligible to participate in this buyback offer.
Buyback size is approx 1.42% of total outstanding equity. So if any investor holds 10,000 shares, he will be assured of buyback of around 142 shares. (and similar proportion for lower quantity).
Now comes interesting part, as per SEBI requirement around 15% of the total offer needs to be reserved for retail shareholder (holding less than 2 lakh) and this makes everything interesting.
By itself acceptance ratio of 1.42% is not very interesting, but since retailer have a 15% chunk of buyback reserved for them, and there are not as much retail shareholders, so for retails, acceptance ratio are much higher. That is why buyback are much more lucrative for retail shareholders.
With this background, let’s try to answer your questions:
There is no minimum quantity, you can participate with 20 or even 10 share
Yes you can. But that does not mean all of it will be accepted by TCS. What gets accepted. will depend on acceptance ratio. SO after all offers are in, if acceptance ratio for retail turns out to 50% (just hypothetical number) - your 22 shares will be accepted, money (4500*22) will be paid to you and remaining 22 shares will be returned to you.
Similar for any other acceptance ratio.
Since, you hold 100 shares, you are no longer retailer. So firm acceptance ratio for you would be around 1-2% of your holding.
So regardless of you offer 100 shares or 44 shares, 1 or 2 shares will be accepted, rest all will be returned.
So this means that 15% of 1.42% of total outstanding equity is reserved for retail shareholders. Hopefully, this would translate to a higher Acceptance Ratio.
Thanks Akash for the time taken to clarify and provide a detailed explanation.
Yes, so out of total 4 crore Shares being bought back, 60 lakh would be reserved for retail.
Based on past experience, this should translate into higher acceptance ratio. People are estimating anywhere from 33% to 75%. But actual number would be known only after offer closes. (and estimate can totally go wrong )
It is shareholder’s money which company is giving back to shareholder. In a way it is similar to dividend. But much more tax efficient.
Company is doing it as a way to return money to shareholder. And since Tatas are biggest shareholder, they get back biggest chunk of money.
HI, if, on 23rd Feb, I have shares worth less than 2 Lac but I tender shares worth more than 2 Lac for the buyback. In that case under which category I will fall i.e. retail investor or HN investor?
Hmm, but the retailers are getting more money compared to other shareholders, in this case. Why are they giving more money to some investors compared to others? This seems unfair. And of course, the Tatas decided it, so they are the only one at loss here.
Nope Tatas didn’t decide that. It is SEBI regulation to have reservations in every buyback for retailers. Idea is small investors should be protected.
Promoters have no option but to comply with it.
And it is minor inconvenience compared to the tax advantage buyback offers to promoters.
Hi All, I have an urgent question about the buyback. I hold 53 shares (as of 21 Feb 2022) with a value of 1.97L. Tomorrow is the ex-date 22 Feb 2022. If i sell 9 shares to reduce my share quantity to 44, will i be eligible by 23 Feb?
I think that it is Cut-off date Feb 23, 2022, that mean shares into the account is T+2 days than out-off account. I thinks that stocks debits from DP on same day. If I am correct then may be. However, Zerodha may clarify.
I wish know that opposite - person having less than 44 share (like 30 shares) on Feb 21 and buys/add later before or on Feb 23 or later but before finalization date. Whether he/she eligible to offer 44 shares on opening date of tender?
No, anything bought extra after 21st, won’t be eligible for tender. While bidding, to avoid cancellation of our bid, we must only bid max of those number of shares(even if more than 44 won’t be an issue) bought only before ex-date.
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