PVR Inox buyback: Last chance to participate in multiplex operator's Rs 300 crore buyback. Should you tender shares?

The Rs 300 crore share buyback of PVR Inox is set to close today, marking the last chance for interested investors to tender shares as India's biggest film exhibitor buys back nearly 21 lakh shares from eligible shareholders at Rs 1,450 per share.

PVR Inox's buyback via the tender route opened on September 10 and is set to close on September 17. The record date for the buyback was scheduled for September 4. This means only those shareholders who owned shares of the company on that day are eligible to tender shares in the offer, and investors taking fresh positions today will not qualify.

Also read | PVR Inox’s Rs 300-crore buyback: Check buyback price, key dates, entitlement ratio

Key things to know about PVR Inox's buyback

Under PVR Inox's buyback offer, eligible shareholders in the reserved category for small shareholders are entitled to tender 9 equity shares for every 157 equity shares held as on the record date, which was September 4. For shareholders falling under the general category, the buyback entitlement has been fixed at 21 equity shares for every 1,108 equity shares held on the record date.

Buyback of shares refers to a corporate action where a company repurchases its own shares from the existing shareholders. Usually, the company purchases the shares at a higher price than the current levels, encouraging investors to participate. Notably, PVR Inox has said that its promoters and promoter groups have indicated their intention to participate in the buyback. They can tender a maximum of 5.69 lakh shares.

How can you participate in PVR Inox’s buyback?

PVR Inox shareholders can place a bid through a stock broker via a separate window that will open up on the stock exchange. The registrar will complete the verification of tendered shares by September 21. Thereafter, the final acceptance or rejection of shares tendered under the buyback will be communicated to the stock exchanges by September 23. The payment will be made to the eligible shareholders by September 24.

After the buyback, PVR Inox will return the unaccepted shares by September 24, as per the schedule shared by the company in its exchange filing earlier this month.

Also read | PVR INOX bets on smaller multiplexes as single-screens decline

How much profit can retail investors make from PVR Inox buyback?

Let’s take an investor who bought 160 shares of PVR Inox at Rs 1,247.50 apiece before the record date and is planning to tender shares in the buyback for example. The total value of her shares as on the record date stood at Rs 1,99,600, making her eligible for PVR Inox's reserved category for small shareholders (less than Rs 2 lakh).

As per the entitlement ratio, she will be entitled to tender 9 shares out of her 160 stock holding (9 equity shares for every 157 equity shares held on the record date). It is important to note that not all shares she tenders may be accepted in the buyback process.

However, for the shares accepted as part of the buyback, she will earn Rs 202 per share at the buyback price of Rs 1,450 per share, compared to the loss she would have made if she sold the shares at the current market price of less than Rs 1,260 apiece.

Analyst on PVR Inox buyback

Assuming an acceptance ratio of around 25% (versus the entitlement ratio of 5.73%), around 40-41 shares could be accepted, said Sunny Agrawal, Deputy Vice President of Fundamental Research at SBI Securities. Based on the current market price of around Rs 1,177 per share and the buyback price of Rs 1,450 per share, the potential pre-tax profit could be approximately Rs 10,900, translating into a pre-tax return of roughly 5.5% on an investment value of about Rs 2 lakh, the analyst said.

“We believe that any retail investor holding shares within the small shareholder category may consider tendering shares in the buyback,” the analyst further said.

Also read | PVR INOX’s Marriott moment: How a theatre giant is rewriting the cinema playbook in India with a new-age expansion model

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.