Care Ratings` Buyback Offer - Shareholders` Dilemma

Case Code: FINC213
Case Length: 10 Pages
Period: 2022-2023
Pub Date: 2024
Teaching Note: Available

Price: Rs.300
Organization: CARE Ratings Limited
Industry: Financial Services
Countries: India
Themes: Capital Structure

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case study discusses the share buyback offer issued by CARE Ratings Limited, one of the leading credit rating companies in India. Many experts believe that this was an opportunity for investors to encash their investment in the company as the buyback price of Rs. 515 per share represented a premium of 11.50% and 10.35% on the volume weighted average market price of the share on the Bombay Stock Exchange (BSE) and NSE respectively, during the three months before July 12, 2022, the day the company intimated to stock exchanges about the buyback.

However, another group of analysts felt that shareholders should ignore the buyback and wait for the upside movement in the stock as investment in the company was a good long-term bet. In addition to this, they felt that post-buyback, the shares would trade above Rs. 515, so shareholders would get a better price then than the buyback offer price. Now, the shareholders have to decide whether to tender the stocks during the buyback or not.