BSE Share Buyback: To Participate or Not?

Stock buybacks are a rage these days. These strategic moves deliver immediate value to shareholders, making them quite appealing.

However, there's another compelling reason to embrace share buybacks. Companies that engage in stock buybacks often prove to be outstanding investments.

When a company repurchases its own stock, it effectively reduces the number of shares available to the public. As a result, existing shareholders see their ownership stake in the company grow, enabling them to claim a larger portion of the company's earnings.

They help boost stock prices and indicate that the company possesses ample resources for repurchases, which are very favourable for investors.

In light of the current trend, one noteworthy company that has recently announced a share buyback is BSE (Bombay Stock Exchange).

Coming back to the buyback details...the company has announced a buyback of shares through a tender offer.

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 don't get much excited. In the open market offer, everything is routed through the stock exchange, and the price isn't fixed. It can vary.

With that explainer out of the way, here are the key details about BSE's share buyback:

1. The board is yet to fix a record date for it.
2. The company will buy back shares at Rs 816 per share. This is around 20% higher than its current market price of Rs 680.4.
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 4.5 m shares representing 3.39% of the total equity.

BSE India Buyback Details

Buyback Price (Rs per share)	816
Current Price (Rs per share)	680.4
Buyback Premium (%)	20%
No of shares proposed for buyback (million)	4.5
Buyback as proportion of total equity (%)	3.39
Buyback aggregate amount (Rs million)	3,748
Buyback method	Tender offer route
Record date for buyback	NA

Data Source: Equitymaster

BSE's buyback history

Before this buyback, BSE announced a share buyback in 2019, 2018.

The last buyback of BSE was worth Rs 4.6 billion (bn) between 30 August 2019 to 16 September 2019. During the buyback, it had tendered 6.7 m shares worth about Rs 4.6 bn.

The share buyback price was Rs 680 per equity share.

Before this, BSE launched a buyback program of Rs 1.6 bn between 1 February 2018 to 31 July 2018. The company bought back 1.6 m shares at Rs 1,100 per equity share.

BSE's financial performance

Over the past five years, the company's revenue has grown at a CAGR of 6.7%, while the net profit has grown marginally. This was due to an increase in currency derivatives volumes, and rising transaction charges income.

For the financial year 2023, the company's total revenue grew by 10.4% YoY. This was due to a 103% increase in the total premium collected by the insurance broking segment.

Financial Snapshot (2019-23)

Particulars	19-Mar	20-Mar	21-Mar	22-Mar	23-Mar
Revenue (Rs m)	6,875	6,300	6,547	8,635	9,539
Revenue Growth (%)	-1.6	-8.3	3.9	31.9	10.4
Net Profit (Rs m)	1,942	886	1,417	2,449	2,057
Net Profit Margin (%)	26.7	16.4	16.2	22.3	27

Data Source: Company's Investor Presentation FY 2023

In the most recent quarter of March 2023, BSE's revenue grew by 11% to Rs 2.3 bn, and the net profit grew by 24% YoY to Rs 886.1 m. This was due to an increase in other incomes.

The exchange has declared a final dividend of Rs 12 per equity share for the financial year 2023.

Going forward, the company plans to expand and evolve the products and services within its core business.

Should you participate?

Given the recent hurdles faced by BSE, such as sluggish economic growth and rising inflation impacting trading volumes, the prospects of the stock exchange remain uncertain. The Indian stock market is undergoing significant changes with the new trading launches.

Participating in the buyback requires careful consideration.

When deciding whether to participate in BSE's buyback or not, investors should conduct diligent research to evaluate the terms and conditions of the buyback offer.

How shares of BSE have performed recently

BSE share price is up 24% in 2023 so far. In the past one year, it has gained by 12.9%.

BSE touched its 52-week high of Rs 712.9 on 2 August 2022. Its 52-week low was Rs 406.2, touched on 28 March 2023.

About BSE

The Bombay Stock Exchange (BSE) is an Indian stock exchange which is located on Dalal Street in Mumbai. Established in 1875 by cotton merchant Premchand Roychand, a Jain businessman it is the oldest stock exchange in Asia and the tenth oldest in the world.

BSE provides an efficient and transparent market for trading in equity, currencies, debt instruments, derivatives, and mutual funds. BSE SME is India's largest SME platform which has listed over 250 companies.

BSE Star MF is India's largest online mutual fund platform which processes over 27 lakh transactions per month and adds almost 2 lakh new SIPs every month. BSE Bond is the transparent and efficient electronic book mechanism process for a private placement of debt securities.

To know more about the company, check out the BSE company fact sheet and quarterly results.

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