Bajaj Auto's Rs 5,633 crore share buyback: Should you participate or avoid?

Bajaj Auto last week announced its biggest-ever share buyback worth Rs 5,633 crore at a buyback price of Rs 12,000 per share, with analysts highlighting why for retail investors can benefit from the offer.

The two-wheeler major’s buyback price implies a premium of more than 12% over the stock’s previous closing price of Rs 10,711.50 apiece on NSE. The company last week announced that its board approved a plan to buy back up to 46.94 lakh shares, each with a face value of Rs 10, representing 1.68% of the total paid-up share capital, for an aggregate amount not exceeding Rs 5,633 crore.

The buyback will be done via the tender route, and all shareholders on the record date will be eligible to participate in the corporate action. The offer is, however, subject to shareholders’ approval at its upcoming Annual General Meeting (AGM).

Bajaj Auto's board of directors has also approved the formation of a buyback committee, which can increase the buyback price or decrease the number of shares to be bought back till one day before the record date, without changing the overall buyback size.

The record date to determine the eligibility of shareholders who can tender shares as part of the buyback, along with other details such as entitlement ratio and more are yet to be announced.

Should you participate or avoid Bajaj Auto’s buyback?

Market regulator SEBI has mandated that 15% of a buyback’s total offer size must be reserved for small shareholders. From Bajaj Auto’s context, this means that around 7.04 lakh shares worth Rs 844.92 crore at the buyback price will be reserved for small shareholders holding shares worth up to Rs 2 lakh on the record date, Anand Rathi highlighted in its research report.

“As per shareholding data of annual report 2025, individual investors qualifying above criteria held approximately 64,16,761 shares, implying an acceptance ratio of around 11% for retail investors. Thus, the overall acceptance ratio for retail investors is 11%,” the research analysts at the firm explained, while noting that the acceptance ratio can change on record date.

Historically, buybacks where promoters abstain from participation tend to witness relatively better acceptance ratios for retail investors compared to institutional categories, said Uttam Kumar Srimal, Senior Research Analyst at Axis Direct. “Since promoters are not participating, the effective competition for tendering shares reduces significantly,” he said.

This implies higher probability of share acceptance in retail category, the analyst said, adding that this also may lead to potential arbitrage opportunity if purchased below buyback price. Additionally, lower outstanding equity supports EPS improvement, he added.

The buyback is also a strong signal of management confidence and surplus cash generation, Srimal said. “We believe the buyback announcement reflects Bajaj Auto’s strong balance sheet, healthy free cash flow generation, efficient capital allocation approach and confidence in long-term business fundamentals,” he added.

“The non-participation of promoters materially improves attractiveness for retail investors under the tender offer mechanism. Final gains, however, will depend on acceptance ratio, stock price movement before record date, participation level from retail category. Investors should closely monitor the upcoming record date announcement and letter of offer before taking participation decisions,” he concluded.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)