CRR_Call Tracker

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ValueProductPastPerformance

Company NameReco DateReco PriceExit PriceExit Date% ReturnIn days
ITC Ltd. 28/12/2023464.20487.5002/01/2025 5.02% 1 yrs
Britannia Industries Ltd. 27/07/20234,875.805,028.2512/11/2024 3.13% 1 yrs
JSW Steel Ltd. 22/02/2024826.951,003.0026/09/2024 21.29% 217 days
Bajaj Auto Ltd. 22/08/20249,910.0011,930.0017/09/2024 20.38% 26 days
Dr. Reddy's Laboratories Ltd. 26/10/20235,429.306,536.0005/07/2024 20.38% 253 days
Shriram Finance Ltd. 25/04/20242,430.102,955.0028/06/2024 21.60% 64 days
Coal India Ltd. 25/01/2024389.50501.6022/05/2024 28.78% 118 days
Infosys Ltd. 27/10/20221,522.601,411.6019/04/2024 -7.29% 1 yrs
State Bank Of India 25/05/2023581.30782.0505/03/2024 34.53% 285 days
The Indian Hotels Company Ltd. 24/08/2023401.85517.9007/02/2024 28.88% 167 days

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What is Leveraged Buyout?
DSIJ Intelligence
/ Categories: Knowledge, Fundamental

What is Leveraged Buyout?

Infamous for being a hostile takeover tactic, this type of buy-out entails using large amounts of debt.

Leveraged Buyout or LBO, in simple terms, means using borrowed money (debt) for the acquisition of a company. Very often, the assets of the company being acquired are used as collateral to acquire debt. The borrowed money, or debt, could be in the form of either loans or bonds.     

LBO is useful for doing the following:   

  • To make a public company private.   

  • To break up a large company   

  • To enhance the efficiency of the (acquired) company.  

The main objective of LBO is to be able to acquire without dedicating a large amount of money. Infamous for being a hostile takeover tactic, this type of buy-out entails using large amounts of debt (generally, 90 per cent debt and 10 per cent equity).   

Using higher leverage (debt) enhances the return on equity (for the acquirer company). Moreover, the debt is strapped to the acquired company and not the acquirer. This mitigates the risk of tight cashflows and downturn in the economy causing losses to the acquired company as its assets can be sold off to pay the debt.     

Ideally, only companies that are mature, stable, non-cyclical, and have predictable cashflows are good prospects for a leveraged buyout. This is because a steady cash flow is essential for servicing the huge debt, which is strapped to the company post LBO.   

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