Chambal Fertilisers and Chemicals bought back shares at ₹450 per share through a tender offer that ran from 24 January 2024 to 31 January 2024 (record date 18 January 2024), with the shares listed on the BSE, NSE. Shareholders on the register on 18 January 2024, the record date, were eligible to tender. The offer covered 1,55,55,555 shares, 3.74% of the equity, about ₹700 crore.
The buyback price was 19.9 percent above the closing price of ₹375.30 on 8 January 2024, the last close before the offer; a small shareholder could tender up to 444 shares within the two-lakh-rupee limit. Incorporated in 1985, Chambal Fertilisers and Chemicals Ltd is an Indian agrochemicals manufacturing company established by the KK Birla Group. The company is based in Kota, Rajasthan and is one of the largest private sector fertilizer producers in India.
Chambal Fertilisers and Chemicals Ltd produces urea at three plants in the Gadepan area of Kota. The company also markets other fertilizers and agricultural inputs, such as di-ammonium phosphate (DAP) and muriate of potash. Chambal Fertilisers and Chemicals Ltd's annual production of more than 3.4 million metric tons of urea accounts for nearly 15% of the total urea produced in India. The company serves the farmers in ten states across the northern, eastern, central and western regions of India.
It is the primary supplier of fertilizers in the states of Rajasthan, Madhya Pradesh, Punjab, and Haryana. The company boasts an extensive marketing network, comprising of 15 regional offices, 2,200 dealers and 22,000 village-level outlets. The company has been recognized with the Sword of Honour award from the British Safety Council for two years in a row.
Additionally, it has been granted ISO 14001 certification for Environment Management System Standard, ISO 9001 certification for Quality Management System Standard, and OHSAS 18001 certification for Occupational Health and Safety Management System Standard.
| Acceptance | Shares accepted | Profit |
|---|---|---|
| 33% | 146 | ₹10,906 |
| 50% | 222 | ₹16,583 |
| 75% | 333 | ₹24,875 |
| 100% | 444 | ₹33,166 |
Before brokerage and tax, on the maximum small-shareholder holding at the last close before the offer; the offer has since closed.
| Metric | 31-Mar-23 | 31-Mar-22 | 31-Mar-21 |
|---|---|---|---|
| Net Worth | 7,052.92 | 6,386.09 | 5,235.75 |
| Profit After Tax | 1,033.79 | 1,566.06 | 1,747.59 |
| Revenue | 27,940.57 | 16,136.83 | 12,756.36 |
| Total Borrowing | 3,335.27 | 4,323.09 | 3,918.41 |
The Buyback is being undertaken for the following reasons: The Buyback will help the Company to return surplus cash to its shareholders holding Equity Shares thereby, enhancing the overall return to shareholders; The buyback will help the company to improve its capital structure by optimizing debt to equity ratio. It would also help in improving financial ratios such as earnings per share and return on equity.
In a tender offer the company fixes a price, usually above the market price, and invites every shareholder who held shares on the record date to offer some or all of them back. The entitlement ratio says how many shares you may tender for every share you hold, and because most offers are oversubscribed the acceptance ratio, the share of tendered shares the company actually buys, is known only after the offer closes.
Shares are tendered through your broker during the offer window; accepted shares are paid for at the buyback price and the rest return to your demat account within a few days of the close.
Fifteen percent of every tender offer is reserved for small shareholders, defined as those whose holding in the company was worth two lakh rupees or less at the market price on the record date. Because far fewer shares are tendered in that category, its entitlement ratio is usually much higher than the general category's, and that reservation is the reason retail investors follow buybacks at all.
The figures on this page show how many Chambal Fertilisers and Chemicals shares fit within the limit, what they cost at the last closing price, and what the profit would be at different acceptance ratios, before brokerage and tax.
Since October 2024 the amount a shareholder receives in a buyback is taxed as a dividend in their hands at their slab rate, and the cost of the accepted shares becomes a capital loss that can be set off against capital gains. That makes the after-tax result quite different from the headline premium, and for a shareholder in a high tax bracket a buyback with a modest premium can be worth less than selling on the exchange.
Work it through for your own bracket, or ask a tax adviser, before tendering.
₹450 per share, 19.9 percent above the closing price of ₹375.30 on 8 January 2024, the last close before the offer. The premium over the market price is what made tendering worthwhile.
18 January 2024. Shareholders had to hold the shares in their demat account on that date, which meant buying them by 17 January 2024 so that delivery settled in time.
The tender window ran from 24 January 2024 to 31 January 2024. Shares were tendered through brokers, and tender forms were accepted until 31 January 2024.
1/14: the company accepted 1 shares for every 14 held, about 7.1 percent of a small shareholder's holding, before any unaccepted shares from other categories were redistributed. The general category ratio was 1/29.
Up to 444 shares, which is the two-lakh-rupee small-shareholder limit divided by the buyback price of ₹450. At the closing price of ₹375.30 that holding cost about ₹1,66,633.
The offer closed on 31 January 2024. The company has not published the final acceptance ratio; the table shows what the profit would have been at 33 to 100 percent acceptance. At 33 percent the profit on a maximum small-shareholder holding would have been about ₹10,906; at 100 percent about ₹33,166, before brokerage and tax.
Accepted shares were paid for at ₹450 and unaccepted shares were returned to demat accounts by 7 February 2024.
For buybacks completed after 1 October 2024 the amount received is taxed as dividend income at your slab rate, and the cost of the accepted shares becomes a capital loss that can be set off against capital gains. Confirm the treatment for your own position with a tax adviser.