Suprajit Engineering bought back shares at ₹750 per share through a tender offer that ran from 2 September 2024 to 6 September 2024 (record date 27 August 2024), with the shares listed on the BSE, NSE. Shareholders on the register on 27 August 2024, the record date, were eligible to tender. The offer covered 15,00,000 shares, 1.08% of the equity, about ₹112.50 crore.
The buyback price was 39.2 percent above the closing price of ₹538.75 on 14 August 2024, the last close before the offer; a small shareholder could tender up to 266 shares within the two-lakh-rupee limit. Suprajit Engineering Private Limited, the company's name changed to Suprajit Engineering Limited in June 1995. Suprajit Engineering Limited manufactures high-quality liner cables and light sources exacting to Japanese standards for the automotive industry.
The company caters to a wide spectrum of automotive and non-automotive cable requirements. Suprajit Engineering is amongst the top five cable manufacturers in the world.
| Acceptance | Shares accepted | Profit |
|---|---|---|
| 33% | 87 | ₹18,378 |
| 50% | 133 | ₹28,096 |
| 75% | 199 | ₹42,038 |
| 100% | 266 | ₹56,192 |
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 | 152.11 | 173.08 | 142.71 |
| Reserves & Surplus | 1,086.01 | 926.76 | 897.54 |
| Revenue | 2,790.99 | 1,877.12 | 1,674.45 |
| Total Assets | 2,434.52 | 1,738.53 | 1,713.27 |
The buyback will help the company return surplus cash to its shareholders holding equity shares broadly in proportion to their shareholding. The buyback consists of a reservation for the small shareholder. The company believes that this reservation for small shareholders would benefit many public shareholders who would be classified as small shareholders. The buyback may help improve financial ratios like return on equity, by reduction in the equity base, thereby leading to a long-term increase in shareholders' value.
The Buyback gives an option to the shareholders holding Equity Shares of the Company, who can choose to participate and get cash in place of Equity Shares or they may choose not to participate and enjoy a resultant increase in their percentage shareholding, post the Buyback offer.
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 Suprajit Engineering 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.
₹750 per share, 39.2 percent above the closing price of ₹538.75 on 14 August 2024, the last close before the offer. The premium over the market price is what made tendering worthwhile.
27 August 2024. Shareholders had to hold the shares in their demat account on that date, which meant buying them by 26 August 2024 so that delivery settled in time.
The tender window ran from 2 September 2024 to 6 September 2024. Shares were tendered through brokers, and tender forms were accepted until 6 September 2024.
3/62: the company accepted 3 shares for every 62 held, about 4.8 percent of a small shareholder's holding, before any unaccepted shares from other categories were redistributed. The general category ratio was 1/105.
Up to 266 shares, which is the two-lakh-rupee small-shareholder limit divided by the buyback price of ₹750. At the closing price of ₹538.75 that holding cost about ₹1,43,308.
The offer closed on 6 September 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 ₹18,378; at 100 percent about ₹56,192, before brokerage and tax.
Accepted shares were paid for at ₹750 and unaccepted shares were returned to demat accounts by 13 September 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.