SIMPLE IS BETTER – ISSUE -13 – BUYBACK

I have mentioned during the series of Warren Buffett’s letter that buyback done by the company considers good. Also when the market value of the company is available at discount from intrinsic value and company does not have a better opportunity to make an investment then company has to repurchase own shares. We have heard that the company having good management then they come up with a buyback and others will come up with a dilution of capital. The buyback is one of the criteria for judging a capital allocation decision of management that whether good or not.

What is Buyback?

For Detail Issue, Click here —> SIMPLE IS BETTER – ISSUE -13 – BUYBACK

WARREN BUFFETT’S LETTER – 2008 – 2010

Warren Buffett’s Letter 2008

WB 2008 01

WB 2008 02

When there is a pessimism into the market then we get an opportunity to buy a good business at a discounted value. But during a euphoric time period, good businesses are available at a sky-high value.

Indian companies examples

One of the wealth creator IT Company during an IT bubble

InfyINFY Chart

One of the wealth creator IT Company during an IT bubble

WiproWipro Chart

One of the two-wheelers and commercial vehicle manufacturing company was available at a discounted value during pessimism of the year 2008

EicherEicher Chart

Warren Buffett’s Letter 2009

What is avoided by Mr. Buffett and Mr.Munger —

WB 2009 01

WB 2009 02WB 2009 03WB 2009 04

Mr. Buffett on derivatives –

WB 2009 05

Warren Buffett’s Letter 2010

WB 2010 01

One of the infrastructure company

RInf

One of the electric motors, generators, transformers manufacturing company

Siemens 01Siemens 02

Mr. Buffett on debt-

WB 2010 02

Example SIMPLE IS BETTER – ISSUE -4 – Mr. EMI V/S Mr. SIP

Mr. Buffett on crowd mentality-

WB 2010 03

Mr. Buffett on Repurchase of shares –

WB 2010 04

One of the Pharma Company of India which has sold one of the business segment into the FY2011 and company becomes a Cash bargain. The company has done a buyback at that time.

PEL 01PEL 02

The company has a total Cash balance of Rs.1770.28 crore + Upcoming cash due to the sale of the business worth of Rs.7136.00 crore = Rs.8906.28 crore. And the company was available at MCap of ~Rs.7830 crore. Entire continuing business was not given valued by the market.

One of the two-wheelers and commercial vehicle manufacturing company has done a buyback in the year 2009

EM 01

The company has a total Cash balance of Rs.1260.05 crore. And the company was available at MCap of ~Rs.608 crore. Entire continuing business was not given valued by the market.

One of the metal company in the year 2016 has come up with the buyback. In the year 2016, the price of iron ore was traded lower.

Iron oreNMDC 01NMDC 02

Company had a cash balance of Rs.14806 crore in FY16 and PAT of Rs.2517 crore. Company was available at MCap of ~Rs.28440 crore. Entire continuing business ex-cash was available at 5.94x of PAT (MCap Rs.28440 crore – Cash Rs.14806 crore + debt Rs.1497 crore = Rs.15130.86 crore; EV Rs.15130.86 crore / PAT Rs.2517 crore = 5.94x).

Warren Buffett’s Letters 1957 – 2012

PIRAMAL ENTERPRISES LIMITED ANNUAL REPORT REVIEW FY2017-18, FY2015-16, FY2014-15

Piramal Enterprises is a diversified conglomerate having three virtual companies – Financial Services (47% revenue contribution), Pharma (42% revenue contribution) and Information Management (11% revenue contribution).

Mr. Ajay Piramal having a good track record with capital allocation, with acquisitions and one of the shareholder-friendly promoter.

Annual Report Review FY2017-18FY2015-16FY2014-15.

Disclaimer: This is not a recommendation to Buy-Sell-Hold. And I am not a SEBI registered analyst.

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