Freshtrop Fruits bought back shares at ₹175 per share through a tender offer that ran from 8 April 2024 to 16 April 2024 (record date 2 April 2024), with the shares listed on the BSE. Shareholders on the register on 2 April 2024, the record date, were eligible to tender. The offer covered 19,25,000 shares, 19.45% of the equity, about ₹33.69 crore.
The buyback price was 5.2 percent above the closing price of ₹166.30 on 12 February 2024, the last close before the offer; a small shareholder could tender up to 1,142 shares within the two-lakh-rupee limit. Freshtrop Fruits Limited is engaged in the business of supplying grapes and pomegranates from India to supermarkets in Europe. The company has identified the following operating segments as reportable segments: 1. Fresh fruit 2.
Food processing Freshtrop is a leading and consistent supplier of grapes and pomegranates from India to supermarkets in Europe, and Russia. The company has also set up a food processing plant in Nasik for the production of fruit pulp such as mango and guava pulp, tomato paste, etc.
| Acceptance | Shares accepted | Profit |
|---|---|---|
| 33% | 376 | ₹3,271 |
| 50% | 571 | ₹4,967 |
| 75% | 856 | ₹7,447 |
| 100% | 1142 | ₹9,935 |
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 |
|---|---|---|---|
| Profit After Tax | 79.36 | 81.14 | 76.28 |
| Reserves & Surplus | 69.47 | 70.45 | 65.35 |
| Revenue | 8.46 | 7.36 | 9.49 |
| Total Assets | 107.89 | 63.95 | 44.8 |
| Total Borrowing | 21.15 | 24.01 | 30.96 |
The current Buyback is in line with the Company's shareholder-friendly capital allocation practices of returning excess cash to shareholders, thereby increasing shareholders' value in the longer term, and improving the Return on Equity. The Buy-back is being undertaken by the Company to enhance shareholders' value and improve financial ratios. Additionally, the Buy-back is being undertaken for the following reasons:
The Buy-back will help the Company to distribute surplus funds to its shareholders holding Equity Shares broadly in proportion to their shareholding, thereby, enhancing the overall return to the shareholders; The Buy-back, which is being implemented through the Tender Offer as prescribed under the Buyback Regulations, would involve a reservation of number of Equity Shares as per their entitlement or 15% of the Buy-back Size to be bought back whichever is higher, reserved for the small shareholders.
The Company believes that this reservation for small shareholders would benefit a large number of public shareholders, who would get classified as Small Shareholders as defined under Regulation 2(i)(n) of the Buy-back Regulations;
The Buy-back will help in improving financial ratios like earnings per share, return on assets and return on equity calculated on the basis of financial statements, by reducing the equity base of the Company The Buy-back gives an option to the Eligible Shareholders to either choose to participate in the Buyback and receive cash in lieu of their Equity Shares which are accepted under the Buy-back or choose not to participate in the Buy-back and get a resultant increase in their percentage shareholding in the Company post Buy-back, without additional investment.
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 Freshtrop Fruits 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.
₹175 per share, 5.2 percent above the closing price of ₹166.30 on 12 February 2024, the last close before the offer. The premium over the market price is what made tendering worthwhile.
2 April 2024. Shareholders had to hold the shares in their demat account on that date, which meant buying them by 1 April 2024 so that delivery settled in time.
The tender window ran from 8 April 2024 to 16 April 2024. Shares were tendered through brokers, and tender forms were accepted until 16 April 2024.
25/84: the company accepted 25 shares for every 84 held, about 29.8 percent of a small shareholder's holding, before any unaccepted shares from other categories were redistributed. The general category ratio was 11/60.
Up to 1,142 shares, which is the two-lakh-rupee small-shareholder limit divided by the buyback price of ₹175. At the closing price of ₹166.30 that holding cost about ₹1,89,915.
The offer closed on 16 April 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 ₹3,271; at 100 percent about ₹9,935, before brokerage and tax.
Accepted shares were paid for at ₹175 and unaccepted shares were returned to demat accounts by 24 March 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.