Bajaj Auto Share Buyback: To Participate or Not?

A buyback frenzy has hit Dalal Street in recent months, with several companies revealing their plans for stock repurchases.

With just two months into 2024, over nine companies have officially announced or completed buybacks.

This trend has been fuelled by strong financial performance, leading to significant cash reserves. As a result, they have opted to use these funds for purposes such as buybacks, dividends, or acquisitions.

By repurchasing their stock, these companies effectively reduce the number of shares available to the public. This, in turn, boosts the ownership stake of existing shareholders, allowing them to claim a larger portion of the company's profits.

Buybacks not only bolster the company's stock prices but also serve as a positive signal to investors, indicating that the company has considerable resources available for repurchasing its shares.

In light of the current trend, one noteworthy company that will open its share buyback tomorrow is Bajaj Auto.

There are two ways in which companies can execute buybacks - the tender offer route and the open market offer.

In a tender offer, the company makes an offer to buy back shares at a particular price.

Here, the price is usually fixed at a premium, and investors having shares of the company on record date can part with their shares by filling out respective forms over a given period.

In an open market offer, investors do not get very excited. In the open market offer, everything is routed through the stock exchange, and the price isn't fixed.

With that explainer out of the way, here are the key details about Bajaj Auto's share buyback.

1. The buyback will open on 6 March 2024 and close on 13 March 2024
2. The company will buy back shares at Rs 10,000 per share. This is around 24% higher than its current market price of Rs 8,042.8.
3. The aggregate amount of buyback is up to Rs 3.7 billion (bn).
4. The total number of shares to be bought back shall be up to 4 m shares, representing 1.4% of the total equity.
5. This amount works out to 16.33% and 14.49% of the total issued and fully paid-up equity share capital and free reserves, respectively.

Bajaj Auto's promoters and promoter group have expressed their intention to participate in this share buyback and may tender up to an aggregate maximum of 1,875,657 equity shares.

The promoters and promoter group currently hold 54.9% of the total equity share capital of Bajaj Auto.

In the first half of the financial year, Bajaj Auto-generated over Rs 36 bn of free cash flow, which was 1.6x higher than that in the year-ago period.

Bajaj Auto buyback is on a proportionate basis through the tender offer route.

Bajaj Auto's Buyback History

This is not the first time Bajaj Auto is conducting a share buyback. Earlier in June 2022, the company bought back shares.

The company bought back 5.4 m shares, aggregating around 9.6% of the paid-up share capital via the open market.

The buyback price was set at Rs 4,600 apiece. The company had utilised at least 50% of the amount earmarked as the maximum buyback size.

The said buyback was for existing shareholders, except for promoters, promoter groups and persons in control of the company and would be carried out in the open market through a stock exchange mechanism.

Bajaj Auto's Financial Performance

Over the past five years, the company's revenue has grown at a compound annual growth rate (CAGR) of 3.7%, while the net profit has grown at 4.2%. This was due to back-to-back big order wins.

For the financial year 2023, the company's total revenue grew by 10% YoY on the back. However, the net profit for the year came in at Rs 60.6 bn, down 1.7% YoY compared to a year ago.

Financial Snapshot (2019-23)

Particulars	19-Mar	20-Mar	21-Mar	22-Mar	23-Mar
Revenue (Rs bn)	303.6	299.21	277.4	331.4	364.6
Revenue Growth (%)	-	-1.4	-7.2	19.4	10
Net Profit (Rs bn)	49.3	52.1	48.6	61.7	60.6
Net Profit Margin (%)	16.2	17.4	17.5	18.6	16.6

Data Source: Equitymaster

In the most recent quarter of December 2023, the company's revenue from operations jumped 30.1% to Rs 121.1 bn, compared to Rs 93.2 bn in the corresponding period last year.

The revenue growth was led by the acceleration of the domestic business, which on the back of sharp execution and impactful activation during the festive season, cushioned the relatively subdued albeit recovering export sales amidst continued challenges in overseas markets.

The auto major's net profit surpassed the Rs 20 bn milestone for the first time in the quarter under review. At Rs 20.4 bn, Bajaj Auto's net profit rose 37% YoY compared to Rs 14.9 bn in the year-ago period.

The broad-based double-digit year-on-year growth across all segments was bolstered by the market-beating performance in motorcycles, particularly in 125 cc+, sustained momentum on commercial vehicles, and the steady ramp-up of the electric two-wheelers and three-wheelers portfolio.

What Next?

Going forward, two-wheeler major Bajaj plans to scale up its electric vehicle business in the fourth quarter of the current financial year.

The Pune-based automaker is focussing on electric three-wheelers and electric two-wheelers. Bajaj Auto launched electric three-wheelers in select cities last year and has now rolled them out across 23 cities.

It plans to expand its electric three-wheeler network to 70-80 cities over the next couple of months. Bajaj Auto is expected to benefit from improved sales of premium bikes like the Triumph Speed 400 and the forthcoming launch of the Scrambler 400X.

It also plans to invest over Rs 7.5 bn for the financial year 2024, a part of which will be spent on debottlenecking exercises to ramp up its EV component volumes.

How Shares of Bajaj Auto have Performed Recently

Bajaj Auto share price is up 24% in 2024 so far. In the past one year, it has zoomed 125%.

Bajaj Auto touched its 52-week high of Rs 8,650 on 19 February 2024. Its 52-week low was Rs 3,711.1 touched on 8 March 2023.

About Bajaj Auto

Bajaj Auto is one of the leading two and three-wheeler manufacturers in India and it's also world's fourth largest manufacturer.

The auto major has three plants in all, two at Waluj and Chakan in Maharashtra and one plant at Pant Nagar in Uttaranchal.

The Bajaj brand is well known for its research and development (R&D) product development process engineering and low-cost manufacturing skills.

Bajaj Auto is among the top companies which are riding the EV revolution in India when it comes to scooters.

For more details about the insurance sector, you can have a look at Bajaj Auto factsheet and quarterly results on our website.

You can also compare Bajaj Auto with its peers -

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