Bajaj Auto share buyback to open on July 1: Should retail investors participate?

The tendering process for the share buyback of Pune-headquartered Bajaj Auto Ltd begins on July 1, next week. A couple of brokerages said retail investors should consider tendering their shares in the buyback, noting that the buyback price of Rs 12,000 offers a potential upside of about 23 per cent over the prevailing market price of around Rs 9,770-odd levels.

On Wednesday, Bajaj Auto shares were down 2.46 per cent after the two-wheeler major reported a cyber security incident, involving a ransomware attack impacting the systems of Bajaj Auto and its wholly owned subsidiary Bajaj Auto Technology. The stock has turned ex-date for share buyback. The record date to identify the eligible shareholders for the issue is today. 

As per Choice Broking's estimate, the acceptance ratio in the retail category could be approximately 10.97 per cent. 

"In the retail segment, participation is capped at Rs 2,00,000 in value — which means an investor can tender a maximum of 16 shares (at Rs 12,000 per share). Based on the estimated acceptance ratio, approximately 1–2 shares out of every 16 tendered are likely to be accepted by the company," Choice Broking said based on Tuesday's share price. 

"Investors holding Bajaj Auto shares are advised to participate through their respective brokers before the tender window closes. This buyback presents a clear short-term value unlocking opportunity given the significant premium on offer," Choice Broking said.

Saurabh Jain, Head of Fundamental Research at SMC Global Securities said the share buyback is offering an attractive exit avenue for shareholders whose shares will be accepted in the tender process. 

He noted that the overall buyback size remains relatively small, with the company proposing to repurchase only 46.94 lakh shares, equivalent to 1.68 per cent of its outstanding equity capital. Hence, the potential gains are likely to be moderate rather than exceptional.

Jain said 15 per cent of the buyback is reserved for retail shareholders, but the retail shareholder base is significantly larger than the reserved quota.

"Based on the current shareholding pattern, the theoretical entitlement ratio works out to approximately 4.5–5 per cent, suggesting that acceptance may remain limited. Although actual acceptance ratios could be somewhat higher depending on participation levels and shareholder behavior, investors should not expect the exceptionally high acceptance rates witnessed in certain past buybacks," Jain said.

The share buyback will remained open for a period of five working days until Tuesday, July 7.