In this issue, we examine - a) ICICI Bank's heist via ICICI Securities delisting process, b) a 22% profit opportunity with Somany Ceramics Buyback & c) new management as a catalyst in Cupid Limited
Most welcome. Nope, the acceptance ratio is an after-event. It is calculated after the requests have been received from eligible shareholders (afterall, not everyone might want to participate in the buyback).
Hi Shankar - As usual, your thoughts and reasearch are well articulated. Just one observation - you have mentioned that Somany Ceramics buyback appears lucrative as it represents 15.18% of the paid up capital and free reserves vis-a-vis 1.12% for TCS. However as per the TCS letter of offer, the buyback size represents 24.45%/ 20.48% based on standalone/ consolidated interim financials. Hence, if one were to factor the lucrativeness purely from the buyback size as a percentage of overall paid up capital and free reserves, TCS appears to be much better than Somany.
Text: The buyback by the Company of its fully paid-up equity shares of face value of ₹1 (Rupee one) each of up to 4,09,63,855 (Four crore nine lakh sixty three thousand eight hundred and fifty five) Equity Shares (representing 1.12% of the total issued and paid-up equity share capital of the Company as on September 30, 2023) at a price of ₹4,150 (Rupees four thousand one hundred and fifty only) per Equity Share payable in cash for an aggregate consideration not exceeding ₹17,000 crore (Rupees seventeen thousand crore only) excluding transaction costs, applicable taxes, other incidental and related expenses
Thank you so much Shankar for sharing these articles. Appreciate it.
One quick question - Can we really consider icici securities really as cash-rich business given that it has significant liabilities including loans on the liabilities side ? If a company has substantial cash reserves but also carries significant debt, it might not be accurately described as "cash-rich" because the debt obligations offset the positive aspect of having cash. Kindly share your thoughts.
With re: ICICI Securities and the "debt" in their books, a brokerage business should not be looked at as manufacturing or service entity but more as a banking entity. Let me explain.
Much like how a bank operates, the brokerage has a pass-thru function i.e. money goes from clients to shares and back from shares to clients. But brokerages offer additional services like margin trading facility wherein the broking firms guarantees settlement with the clearing corporation. Ergo, it faces risks like market risk, interest rates, forex etc. which requires these brokerages to borrow & lend to maintain the books and their solvency. The "debt" in the broker's book is akin to that and is a part & parcel of their daily operations
I could not find anything in their announcement regarding this. As this is entirely a share swap, one should assume that there will be some method of adjusting for such scenarios. It's a good point though
So if one is holding say 50 shares of ICICI sec, ideally he/she should get 32 shares of ICICI and cash payment for fractional/ rounded off shares. One may work out similar swap ratio based on various scenarios
Hi Shankar,
Thanks for the great write up ! Do we know any specifics related to acceptance ratio ?
Most welcome. Nope, the acceptance ratio is an after-event. It is calculated after the requests have been received from eligible shareholders (afterall, not everyone might want to participate in the buyback).
Hi Shankar - As usual, your thoughts and reasearch are well articulated. Just one observation - you have mentioned that Somany Ceramics buyback appears lucrative as it represents 15.18% of the paid up capital and free reserves vis-a-vis 1.12% for TCS. However as per the TCS letter of offer, the buyback size represents 24.45%/ 20.48% based on standalone/ consolidated interim financials. Hence, if one were to factor the lucrativeness purely from the buyback size as a percentage of overall paid up capital and free reserves, TCS appears to be much better than Somany.
Thank you Aashish. I was referring to Page 4 of this document: https://www.tcs.com/content/dam/tcs/pdf/discover-tcs/investor-relations/corporate-actions/2023-24/letter-of-offer-buyback.pdf
Text: The buyback by the Company of its fully paid-up equity shares of face value of ₹1 (Rupee one) each of up to 4,09,63,855 (Four crore nine lakh sixty three thousand eight hundred and fifty five) Equity Shares (representing 1.12% of the total issued and paid-up equity share capital of the Company as on September 30, 2023) at a price of ₹4,150 (Rupees four thousand one hundred and fifty only) per Equity Share payable in cash for an aggregate consideration not exceeding ₹17,000 crore (Rupees seventeen thousand crore only) excluding transaction costs, applicable taxes, other incidental and related expenses
Thank you so much Shankar for sharing these articles. Appreciate it.
One quick question - Can we really consider icici securities really as cash-rich business given that it has significant liabilities including loans on the liabilities side ? If a company has substantial cash reserves but also carries significant debt, it might not be accurately described as "cash-rich" because the debt obligations offset the positive aspect of having cash. Kindly share your thoughts.
Most welcome, glad you liked it Ramshad.
With re: ICICI Securities and the "debt" in their books, a brokerage business should not be looked at as manufacturing or service entity but more as a banking entity. Let me explain.
Much like how a bank operates, the brokerage has a pass-thru function i.e. money goes from clients to shares and back from shares to clients. But brokerages offer additional services like margin trading facility wherein the broking firms guarantees settlement with the clearing corporation. Ergo, it faces risks like market risk, interest rates, forex etc. which requires these brokerages to borrow & lend to maintain the books and their solvency. The "debt" in the broker's book is akin to that and is a part & parcel of their daily operations
Dr. Vijay Malik wrote an article on the business of stock broking firms. You might find it useful. https://www.drvijaymalik.com/stockbrokers/ .. please have a read
Thank you so much for these wonderful insights
Most welcome 🙌
Cupid pvt. I liked that story.
Glad you liked it
Good Read
Thanks!
Not with regards to the delisting. Please keep track of announcements on https://www.bseindia.com/stock-share-price/icici-securities-limited/isec/541179/
Any update on isec merger?
Give some thing like cupid case before it have been matured
In case of icici securities, what would happen if someone owns less than 100 stocks and a swap ratio of 67/100 would be the outcome of voting ?
I could not find anything in their announcement regarding this. As this is entirely a share swap, one should assume that there will be some method of adjusting for such scenarios. It's a good point though
So if one is holding say 50 shares of ICICI sec, ideally he/she should get 32 shares of ICICI and cash payment for fractional/ rounded off shares. One may work out similar swap ratio based on various scenarios