Engineers India Buyback: An investment opportunity in disguise


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Engineers India Buyback: An investment opportunity in disguise

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Engineers India Ltd. fixed January 1, 2021 as the record date for share buyback at 84 Rs per share which is at 11% premium from the current price of 76 Rs. Let's explore this investment opportunity.

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About Engineers India : Setup in 1965, Engineers India Limited (EIL) is a Navratna engineering consultancy, and engineering, procurement and construction (EPC) company in the hydrocarbons and petrochemicals industry. The Company's segments are Consultancy & Engineering Projects, and Turnkey Projects. Engineers India has a Dividend Yield of 7.08 %.

Buyback info: On Nov 12, 2020, The company had approved a proposal to buyback 6.98 crore equity shares of face value of ₹5 each. The EIL board will be buying back shares at ₹84 per equity share. The company said the buyback will cost the company ₹586.90 crore. Engineers India fixed January 1, 2021 as the record date for share buyback i.e. you will be eligible to participate in share buyback if you buy the stock on/before 30 Dec 2020.

Ex- If you are holding 100 shares of EIL at 70 Rs. then company is offering you 84 Rs. per share to buy these shares from you.

Then one important question arises, does EIL will buyback all 100 shares from you at 84 Rs.? This answer can be given by the concept of acceptance ratio.

Also read: Tata Steel: One of the most rewarding trade this year

What is Acceptance ratio? This ratio indicates how much % of shares the company will buyback from you at buyback price. Ex- If you have 100 shares of company A and its acceptance ratio is 40 then company will buyback 40 shares (out of 100) from you at buyback price.

Calculation the acceptance ratio of EIL Buyback:

BuyBack Size:  69,869,047 shares
Shares reserved for retail investors: 10,480,357
Number of shares held buy retail investors (Investment less than 2L): 9,91,11,753

Source

So if all investors apply for Buyback then it comes around 11% (=10,480,357/9,91,11,753 )

This rarely happens that 100% retail investors apply for buyback because most of them either don't know about this or dont how how to apply. that's why I called it as An investment opportunity in disguise.

Also read: 25 Upcoming IPOs and How to Apply for it

How to apply?



Option 1: Those who are holding EIL shares, must have received the process of buyback mail. Just check your mail and follow the instructions.

Option 2:

a) Goto https://linkintime.co.in/
b) select Offers - Buyback

c) Select the name Engineers India (It will appead after 1 Jan 2021). and follow the instructions.

Note: Follow step a, b and c only if you are an existing shareholder of EIL.

The big question is,


It is good to buy Engineers India now (At market price of 76 Rs.) and participate in BUYBACK?



Based Fundamental & Technical analysis, it can be bought at current level and participate in buyback. Five big reasons:

  • The stock has a dividend yield of 7.08%.
  • The company has zero debt.
  • (EIL) has reported better-than-expected execution and strong margins in consultancy segment.
  • Compounded Sales Growth of last three years is 30% CAGR.
  • In its recent report, ICICI securities maintained Buy rating on EIL with target price of 97 Rs.
  • Stock has show Golden Cross after 2.5 years.
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Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin | akshay.equity@gmail.com

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