Igate solutions has come up with a delisting plan and the market reacted with a surge of 10% on the same day. Current market price is Rs.373/-
It is going to get de-listed by the 1st week of December. Is it worth the bet to buy now?
I will give you more insight on this deal. The company's profit is moving up every year starting from 2004 when it reported negative EPS. Because of the management change, it has come up to buy back all the shares from the Indian share market. It would continue to be traded on NYSE though.
As it is a IT company, the current rupee Vs dollar issue certainly affects the revenue. But still the chairperson of IGate has announced that the buy back price will certainly be higher and he is happy about it :)
If we keep P/E as 15, then the price at FY08 will certainly be around Rs. 435/- . If P/E is kept at the price would be around Rs.415/- . The buy back price is expected to above Rs.400/-.
Igate is going to buy back its shares by a process called Reverse Book Building process and it is expected to start on November 26th. It is going to end on November 29th. The preference is given to people having their shares in demat account.
Reverse Book Building process is similar to Book Building process that occurs during IPO. Essentially, all the people who have shares have the right to offer at what ever price they expect from the company. The floor price will alone be set unlike IPO book building where there will be ceiling price also. The process is visible to all people and one can see the current status before bidding.
With the current market price at 374 and with the expected buy back price at more than Rs. 400/-, it is certainly worth the risk. You are getting >10% returns in less than a month. Is it not a good deal?