Coal India’s offer to buyback 10.89 crore shares have received bids for 11.02 crore shares as of 3:30 pm on Friday or 1.01 times of its offer size , the BSE website showed. In July 2016 , the company’s board had approved a proposal to buyback shares for an aggregate of amount not exceeding R3,650 crore .
The company has cash and equivalents of R40,088 crore as on March 31,2016. The buyback offer will close on October 18,2016. CIL reported a 6.6% year-on-year (y-o-y) decline in dispatches and 5.2% y-o-y decline in production in September 2016.
In a note to the investors Kotak Institutional Equities said an impending increase in wages coupled with declining volumes will continue to impact earnings of the company in the current fiscal.
“Potential volume revival may be based on reversal of inventory liquidation at power plants and a seasonally better second half,” it said.
On Thursday the stock was up by 0.17 % at R318.6 on the BSE as compared to 0.16% fall in the benchmark index. The total amount committed by listed companies for buyback of shares so far this year has crossed Rs 25,000 crore and close to two thirds of this is accounted by public sector firms.
According to norms, a company can buy back shares either from its existing shareholders on a proportionate basis through a tender offer, the open market or odd lot holders. In the case of a tender offer, the company has to deposit 25% of the consideration in the escrow account in case the total amount does not exceed R100 crore. Companies offer buybacks to enhance their value since the shares bought back are extinguished and the earnings per share (EPS) gets a boost.