Buyback Strategy: Capitalmind Premium

At Capitalmind Premium, we discuss buyback opportunities, very often. Buying back stocks is a common exercise in India, but there’s a way for a small investor to get a big advantage. Here’s our premium post on why Buybacks are so popular now, due to the tax advantage for promoters versus paying out dividends.

We’ve taken advantage of a clause in any buyback: that there’s a 15% reservation for “small” shareholders. Those who own less than Rs. 200,000 worth of stock get a preference. We check the shareholding patterns and annual report to estimate just one thing: if you are a small shareholder, would you get all your shares accepted?

If the answer is yes, or very close to a yes, we enter and then tender. A single buyback takes three to four months. We will only bother if there’s a 10% return, so that the “low risk” return on an annual basis will go to about 25%+.

In the first year, we made 35%. (Jun 2016 to Jun 2017). Read our post.

In the second year, till March 2018, we made another 43%. But the last two trades were failures – and the trade has now gotten crowded. Too many people know about it. Too many people bid. So we gracefully withdraw from further entries here – this page will remain as an archive.

The Buyback List

Other Buyback Related Posts

Read about why companies do buybacks now.

Also, what does the Buyback bonanza mean for a long-term shareholder?

If you’re wondering how to tender shares, here’s an example with the Mphasis tender offer.

We also analysed a few we didn’t like. E-Clerx was a 25% higher offer, but we said it’s too risky and did not recommend it. It had only 32% acceptance, and the share price fell 15% after the offer, which would have made losses.

We didn’t like TCS at the start. The buyback was for 2850, and the price was 2600 when we analyzed it. But when the price fell to 2300, we noted on Slack (our premium chat channel) that the risk-reward is favourable – and indeed, it turned out to be, with an acceptance of 100%. (Return: 20%+)

Our early post on Demystifying Share Buybacks.

Get Premium for 1667/month*

*When paid annually. Coupon valid till December, 2019