State-owned iron ore producer NMDC has decided to fix January 18 as date to pick shareholders who would be eligible to participate in company's nearly Rs 1,000-crore share buyback."NMDC has fixed January 18, 2019 as record date for determining entitlement and names of eligible shareholders/beneficial owners to whom letter of offer will be sent and will be eligible to participate in buyback of 10,20,40,815 shares fully paid-up equity shares of company," NMDC said in a BSE filing on Wednesday.The government holds 72.43 per cent stake in NMDC.Brokerage firm Anand Rathi Financial Services sees an arbitrage opportunity in NMDC buyback announcement.We have assumed acceptance ratio is 22.6 per cent and advise that traders who want to participate in buyback can buy 2,000 shares from cash market in three different demat accounts at current market price of Rs 91 and not more than 2,000 shares in an individual account and simultaneously hedge by selling one lot of January futures in a single account at 91 where lot size is 6,000.
Also, one has to monitor that shareholders holding should be less than amount Rs 2 lakh as on record date to qualify for this buyback, brokerage firm said in a report.Shares of company settled at Rs 91.40, down 3.74 per cent against its previous close.TableThe brokerage house added that breakeven point is buyback price.
So, when stock price reaches buyback price, traders should exit from strategy without tendering for buyback.On other hand if and once quantity is tendered for buyback, one should square-off remaining position immediately, it stated.