Sharda Motor Industries bought back shares at ₹1,800 per share through a tender offer that ran from 11 June 2024 to 18 June 2024 (record date 5 June 2024), with the shares listed on the BSE, NSE. Shareholders on the register on 5 June 2024, the record date, were eligible to tender. The offer covered 10,27,777 shares, 3.46% of the equity, about ₹185 crore.
The buyback price was 13.3 percent above the closing price of ₹1,588.05 on 18 April 2024, the last close before the offer; a small shareholder could tender up to 111 shares within the two-lakh-rupee limit. Sharda Motor Industries Limited (SMIL) is based in New Delhi, India. It specializes in the production, assembly, and distribution of automotive and white goods components to OEMs.
SMIL is an ISO 9001-certified company with a wide range of products, including sheet metal component, exhaust systems, seat frames, fuel tanks, and other automotive components. SMIL established an R&D centre in 2010 at Mahindra World City, 45 km from Chennai airport, to design, test, and validate exhaust systems for passenger vehicles, commercial vehicles, and non-automotive applications. In 2004, SMIL established a unit to supply Air Conditioner Cabinet assembly for Samsung India.
Sharda Motor is a manufacturer of a wide range of products that includes Exhaust Systems, Catalytic Converters, Independent Suspension, Seat Frames, Seat Covers (for Two-Wheelers and four-wheelers), Soft-Top Canopies, and Pressed parts for white goods. The company takes pride in meeting the needs of its customers promptly and accurately while maintaining the highest quality standards. They offer all their employees equal opportunities for development, advancement, and growth.
Sharda Motor has modern manufacturing facilities with a continuous focus on innovation, technology upgradation, research, and development to provide the best products and services to their customers.
| Acceptance | Shares accepted | Profit |
|---|---|---|
| 33% | 36 | ₹7,630 |
| 50% | 55 | ₹11,657 |
| 75% | 83 | ₹17,591 |
| 100% | 111 | ₹23,526 |
Before brokerage and tax, on the maximum small-shareholder holding at the last close before the offer; the offer has since closed.
| Metric | 31-Dec-23 | 31-Mar-22 | 31-Mar-21 |
|---|---|---|---|
| Net Worth | 781.82 | 599.77 | 445.45 |
| Profit After Tax | 205.43 | 161.49 | 78.59 |
| Reserves & Surplus | 541.65 | 356.69 | |
| Revenue | 2,741.67 | 2,284.85 | 1,757.99 |
| Total Assets | 1,388.93 | 1,065.73 | 972.73 |
The Buy-Back will help the Company to return surplus cash to its shareholders holding ordinary shares broadly in proportion to their shareholding, thereby, enhancing the overall return to shareholders. The buyback which is being implemented through the tender route as prescribed by the Buyback regulations, involves allocation of the number of equity shares as per their entitlement as 15% of the number of equity shares to be bought back whichever is higher, reserved for small shareholders.
The Company believes that the reservation for small shareholders would benefit a large number of public shareholders, who would get classified as small shareholders as per Regulation 2(i)(n) of the Buy-Back Regulations The Buy-Back would help in improving return on equity by reducing the share capital base and increasing shareholder's value in the longer term The Buy-Back gives an option to the shareholders holding ordinary shares of the Company, who can choose to participate and get cash in lieu of ordinary shares to be accepted under the Buy-Back offer or they may choose not to participate and benefit from a resultant increase in their percentage shareholding, post the Buy-Back offer, 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 Sharda Motor Industries 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.
₹1,800 per share, 13.3 percent above the closing price of ₹1,588.05 on 18 April 2024, the last close before the offer. The premium over the market price is what made tendering worthwhile.
5 June 2024. Shareholders had to hold the shares in their demat account on that date, which meant buying them by 4 June 2024 so that delivery settled in time.
The tender window ran from 11 June 2024 to 18 June 2024. Shares were tendered through brokers, and tender forms were accepted until 18 June 2024.
5/24: the company accepted 5 shares for every 24 held, about 20.8 percent of a small shareholder's holding, before any unaccepted shares from other categories were redistributed. The general category ratio was 1/33.
Up to 111 shares, which is the two-lakh-rupee small-shareholder limit divided by the buyback price of ₹1,800. At the closing price of ₹1,588.05 that holding cost about ₹1,76,274.
The offer closed on 18 June 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 ₹7,630; at 100 percent about ₹23,526, before brokerage and tax.
Accepted shares were paid for at ₹1,800 and unaccepted shares were returned to demat accounts by 25 June 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.