The Infratel Buyback Offer Has A Near Certain 10% Return But You Have To Own It Today

Bharti Infratel will buy back shares worth Rs. 2,000 cr. soon – in fact, if you buy the shares today, you will qualify to tender your shares for buyback. This is a proportionate buyback at Rs. 425, through a tender offer.
Note: We managed to see a 9.7% return on this trade! Check out this link.
(See the Tender Announcement)
The buyback is for about 2.3% of the company. This is tiny and usually not noteworthy, but bear with us.
Infratel has 70% of its shares held by the promoter (Airtel) and about 25% by FIIs. Only a small percentage is by retail shareholders, and this is a very interesting place to be.
Why?
The offer document states that if you are a small shareholder (i.e. market value of shares is less than Rs. 200,000) and you tender these shares, then 15% of offer is reserved for such shareholders.
15% of the 2.3% is around 0.3% of shareholders. That much is reserved for small shareholders.
But because of the high holding by FIIs and Promoters, it appears that the holding by small shareholders is just 0.19% !
This means: if you buy shares worth less than Rs. 2 lakh and tender them, it’s nearly certain that all the shares you give will be accepted.
The current price of Infratel is Rs. 380. The price of the buyback is Rs. 425. You will make a profit of Rs. 45. Assume a 15% tax (if you tender through your broker, you get to pay STT and claim lower capital gains tax) and you still make Rs. 38 or so. That’s a 10% gain in about a month (when you get the money).

This sounds strange – why is the current price so low? Because institutions don’t get the advantage – only retail does. So the arbitrage doesn’t really exist!
Risks: Of course, so many retail investors may buy that they go beyond the 0.35% or so that is reserved for retail. Which reduces the amount of shares retail can buy so you don’t get full acceptance, and then you’re left with shares that can fall if the market value falls. This is unlikely since that means either promoters or institutions are selling but of course, stranger things have happened!
It’s only half an hour remaining for you to take advantage – since the offer ends today. Sorry for the delay, but we only just got to know!
Disclosure: Not Invested.