The Company’s board is scheduled to meet on December 28, 2021 to take the decision.
Key points to note –
- This is 3rd year in a row. Previous ones being Jan-Mar 2019 and Nov-Dec 2020.
- Jan – Mar 2019: Rs 100 crore at Rs 1,300 per share as against the then prevailing price of around Rs 1,100.
- Nov-Dec 2020: Rs 135 crore at Rs 1,850 per share as against the then prevailing price of around Rs 1,600.
- Company is currently generating an operating cash flow of Rs 600+ crore annually and given the previous track record I would expect the current buyback to be around Rs 160-175 crore @ Rs 2300-2400/ share.
As an investor what I would do –
- To play on the buyback premium in short term – nothing. It rarely works out. Any premium on accepted shared gets mostly nullified by potential short term downticks on the balance shares.
- As a long term investor – I love buybacks. It’s a brilliant way of long term value creation and is also generally considered a good corporate governance practice.
Ajanta Pharma is a highly focused but at the same time boring company. Listen to any of their conference calls to verify it.
Update on Buyback offer
On 28 December 2021, Ajanta informed the following –
- Buyback Price Rs 2,550/ share
- Total amount to be spent (excluding transactions costs) – Rs 285.60 crore
- No. of shares to be bought back 11,20,000 shares implying 1.30% of outstanding shares.
- Record date – January 14, 2022
On all counts, the announced buyback is better than my expectations !