6A.13 Case studies

6A.13.1The TCS buyback, December 2023#

Context Tata Consultancy Services has returned cash through repeated tender-offer buybacks. The December 2023 offer was one of the last large buybacks under the old regime in which the company, not the shareholder, paid the tax.

Timeline and numbers¹

• Size ₹17,000 cr at ₹4,150 a share, about 4.10 crore shares, by tender offer. Record date 25 November 2023; offer open 1–7 December 2023.
• Entitlement ratios: small shareholders (holding at most ₹2 lakh on the record date) 1 share for every 6 held; general category 2 for every 209.
• The offer was tendered about 6.5–6.7 times. Realised small-shareholder acceptance was reported at about 28% to 35%, against about 14–21% in the 2022 buyback.

Mechanism The entitlement ratio for small shareholders is fixed by the 15% reservation divided by the small shareholders' total holding. Actual acceptance exceeds entitlement when some small holders do not tender. Every additional arbitrageur who buys before the record date to tender raises the small shareholders' total holding and lowers everyone's entitlement; this is why reported ratios fell over successive buybacks. By Proposition 6A.6, if ₹4,150 exceeded intrinsic value per share, the premium was a transfer to tendering holders. The tax regime then fixed who kept it: in 2023 the company paid buyback tax on the distributed amount and tenderers paid nothing on accepted shares; under the regime of October 2024 to March 2026 the whole ₹4,150 would have been dividend income at slab rates.

6A.13.2ITC Hotels, January 2025#

The numbers are in 6A.5. Three lessons. (1) The special pre-open session gave a discovered value of about ₹270 per hotel share, but the shares listed at ₹180–188 three weeks later and fell to the lower circuit: discovered value is a residual of the parent's price, not a trading price, and the listing day carried a supply shock from holders who received shares they did not choose. (2) The statutory cost split (13.51% to the hotels business) differed from the market split (about 5.6%), so a shareholder who sold the hotel shares immediately booked a tax loss and kept a correspondingly lower cost on ITC. (3) ITC's retained 40% stake means the parent's ex-price still carries hotel exposure; a "pure" bet on either business needs a hedge.

6A.13.3HDFC Ltd and HDFC Bank, 2022–23: a merger-arbitrage spread#

Context HDFC Ltd, India's largest housing-finance company, announced its merger into HDFC Bank, its own former subsidiary, on 4 April 2022.

Timeline².

• 4 April 2022: announcement. Share exchange ratio 42 HDFC Bank shares for every 25 HDFC shares ($R = 1.68$); HDFC's shareholders were to own about 41% of the bank. Both stocks jumped; a brokerage report that day quoted HDFC at about ₹2,676 and HDFC Bank at about ₹1,654, a price ratio of 1.61 [S].
• The scheme needed approvals from the RBI, SEBI and the stock exchanges, the CCI, the regulators of HDFC's insurance and pension subsidiaries, shareholders and creditors, and the NCLT.
• 1 July 2023: merger effective. Record date for the share swap 13 July 2023; HDFC Bank allotted 3,11,03,96,492 new shares to HDFC shareholders³. Fractional entitlements were settled in cash.
• Reports in June 2023 described the remaining spread as thin, around 1% [S].

Mechanism At the announcement-day prices, the deal value per HDFC share was $1.68 \times 1{,}654 = \text{₹}2{,}778.7$, a spread of ₹102.7 or 3.84%. With completion about 15 months away ($T = 1.24$ years to 1 July 2023), the annualised return if the deal closed was about 3.1%. Over the same period the RBI raised the repo rate from 4.0% to 6.5% (May 2022 to February 2023). By (6A.12), with any financing rate above about 3.1% the implied completion probability exceeds 1 for every fallback below the target price: the spread did not even pay for the capital. The market priced completion as near-certain and the "arbitrage" as a funding trade. Shorting HDFC Bank through futures embedded the financing in the futures basis, and dividend differences between the two stocks entered as carry $c$.

6A.13.4Adani Group and the Hindenburg report, January–February 2023: an event study of a short report#

Context On 24 January 2023 (US time, after the Indian close) Hindenburg Research, a US short seller, published a report alleging stock manipulation and accounting fraud across the Adani Group; the group denied the allegations. Adani Enterprises (AEL) had a ₹20,000 cr follow-on public offer (FPO) about to open, priced at ₹3,112–3,276⁴.

Timeline and prices Daily closes are from Yahoo Finance [S]; the 24 January and 2 February closes match Moneylife's figures to within a rupee.

Date	AEL close (₹)	AEL return	Nifty 50 return	Market-adjusted AR
24 Jan 2023	3,442.00
25 Jan ($\tau = 0$)	3,388.95	−1.54%	−1.25%	−0.29%
27 Jan (26 Jan holiday)	2,761.45	−18.52%	−1.61%	−16.91%
30 Jan	2,892.85	+4.76%	+0.25%	+4.51%
31 Jan	2,973.90	+2.80%	+0.07%	+2.73%
1 Feb	2,135.35	−28.20%	−0.26%	−27.94%
2 Feb	1,565.25	−26.70%	−0.03%	−26.66%
27 Feb	1,193.50

• The FPO opened on 27 January and closed on 31 January, reported fully subscribed (about 1.12 times) [S]. On the evening of 1 February the board resolved not to proceed and to withdraw the offer, saying it wanted to protect investors given market volatility⁵.
• By 2 February the group's listed companies had lost more than US$100 bn of market value (CNBC, 2 February 2023).
• 3 January 2024: the Supreme Court declined to transfer the investigation from SEBI to a special investigation team and directed SEBI to complete its two remaining investigations (of 24) within three months⁶.
• 18 September 2025: SEBI orders found that the related-party allegations examined in those proceedings were not established⁷. Other matters were reported as still under examination.
• Hindenburg Research announced in January 2025 that it was closing [S].

Mechanism With $\tau = 0$ on 25 January (the first Indian session after publication), AEL's day-0 abnormal return was only −0.3% (other group stocks fell more: Adani Ports −6.3% that day). The large reaction came on the second trading day, −16.9%, and the largest after the FPO's withdrawal. The estimation-window standard deviation of AEL's market-adjusted returns (December to mid-January) was about 1.8%, so the 27 January move alone is a $t$-statistic near −10. The sum of abnormal returns from 25 January to 2 February is −64.6%, but the buy-and-hold return over the same days is −54.5%: with moves this large, summed simple returns overstate the loss, and buy-and-hold abnormal returns (or log returns) should be used. To 27 February the buy-and-hold return was −65.3%.

What an event study can and cannot say here. It measures how the market revised its valuation; it cannot say whether the allegations were true. The three-day lag in the main reaction is consistent with information being processed over several sessions (and with the FPO itself becoming the focal test of demand), not with an efficient day-0 jump. The rebound days (30–31 January) while the FPO was open, and the collapse after its withdrawal, show that a financing event inside the window confounds any attempt to separate "the report" from "the capital raise". Event clustering is total: every group company reacted on the same days, so their abnormal returns cannot be treated as independent observations (the clustering factor in the 6A.2 primer; M12 · 12.3 gives the multi-event tests).