Infosys has announced November 1 as record date for its Rs. 13,000-crore buyback. In this article, the returns that retails investors, and specifically, small shareholders stand to make, will be analyzed.
As per Sebi regulations, 15% of the offer is to be reserved for small shareholders holding shares upto a value of Rs. 2,00,000 as on the record date. Thus these investors can buy shares till 27-October and below is the chart showing returns on Rs. 2,00,000.
The columns denotes the buying price for the shares. Since there is time available till 27-October, investors can keep track of buying price and buy depending on availability of funds. As the table denotes, lower the buying price, higher the return.
The returns are calculated assuming all small shareholders opt for buy back. In that case buyback will be oversubscribed, and only part of the shares will be bought back. At June 2017 share holding pattern of various categories of shareholders, for Small Shareholders (below Rs. 2 lakhs) the acceptance ratio works out to 59% . The remaining shares will have to be sold by the investors on their own. The rows shows profit on selling the ~41% shares remaining after buyback basis the then ongoing price, i.e., post buy back completion.
“Buy Low and Sell High” is the mantra everyone wants to follow. But the market offers very few opportunities for investors to actually act on such mantra. The Infosys buyback is one such opportunity and Investors, especially, Small Shareholders need to make the most of it.
There are 2 added things that will spice up the returns. One is the Acceptance Ratio, which is likely to be higher as not all investors have complete knowledge, time or inclination to study and subscribe for buyback. Secondly, Infosys is likely to offer dividend along with the upcoming results on 1 November, which is likely to increase the returns.
How can FinArbitrage help
- If you are buying Infosys shares with the intention of benefiting from buyback, ensure that all procedures and mechanism are in place so that you can actually tender your shares in the buyback. If you are not able to tender in the buyback, your returns will be drastically lower or even negative. For more details please leave a comments below or Contact Us for more details.
- Depending on your holding period, the profit will be categorized as Long Term or Short Term. If holding period is less than one year, then Short Term tax at your Marginal Rate will be applicable. In order to optimize your returns and taxes, please leave a comments below or Contact Us for more details.
- Brokerage and applicable taxes have been factored to arrive at estimated profits in table above. To know exact returns you are likely to make, please leave a comments below or Contact Us for more details.
- If value of your holdings keeps rising, and goes above Rs. 2,00,000 on Record day, then you may not be counted as Small Shareholder. Thus buy requisite quantity, monitor your holdings value, and, offload shares prior to record date as applicable. To understand more you may Contact Us or leave comments below.