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How many maximum shares I can buy to be eligible for the retail category in a buyback offer?

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The retail category (small shareholders with 15% reservation) in a buyback includes a shareholder who holds the equity shares with a market value of Rs 2,00,000 and lesser as on Record Date.

To be eligible for the retail category in buyback offer, you need to hold shares worth Rs 200,000 and lesser, based on the closing price of the stock on the record date. You need to pick the closing price of the stock exchange that has the highest trading volume of that stock on the record date.

Steps to derive the number of maximum shares that qualify for retail participation:

  1. Check the trading volume of NSE and BSE for the stock under buyback offer as on record date,
  2. Pick the closing price of NSE/BSE, whose trading volume for that stock is higher.
  3. Divide 200,000 by the closing price.
  4. Ignore the fractional value to derive the maximum shares that can be bought for the retail category in the buyback.

The above information is not available till the record date arrives. Hence, you can accumulate stock based on the buyback offer price as the most conservative price and eventually collect more stock towards the record date if there is any buffer left.

Example:

  • Buyback Company: TCS (Feb 2022 Buyback)
  • NSE Trading Volume for TCS: 868.95 crores
  • BSE Trading Volume for TCS: 74.78 crores
  • Record day closing price of NSE: Rs 3563.80
  • Maximum number of shares in Demat account on the record date to be eligible for reserved retail category = 56 Shares (200,000/3563.80)
  • Calculation: Rs 3,563.80 * 56 = Rs 199,572.80 (which is less than Rs 2,00,000)

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