The board of Dr Reddy’s Laboratories has approved a proposal to buy back shares, subject to the approval of shareholders, for an aggregate of amount not exceeding Rs 1,569.4 crore at a price not more than Rs 3,500 per share under the open market route.
The buyback would be 14.9% of the total paid-up equity capital and free reserves of the company as on March 31, 2015, the company said in a release. Following the approval, shares jumped over 3.52% and closed at R2,960.70 on BSE on Wednesday.
“The company’s buyback proposal is on account of strong cash flow position and is expected to be earnings per share (EPS) accretive contributing to an overall enhancement of value of shareholders going forward. The proposed buyback is subject to approval of the shareholders of the company, by way of a special resolution through postal ballot and other regulatory approvals, permission and sanctions, as may be required,” the company said. “Based on the minimum buyback size and the maximum buyback price, the company will purchase a minimum of 22,42,024 shares,” it added.
The company has appointed Kotak Mahindra Capital Company as its merchant banker for the buyback process.
Meanwhile, in an analyst earnings call, the company said that it is awaiting a response from USFDA for future course of action over its three plants, for which the health regulator had issued warning letter in November 2015, as the company has completed its comprehensive corrective and preventive action plan (CAPA). The USFDA in the warning letter issued to the company on November 5 last year had said it found several violations with regard to current good manufacturing practices in API manufacturing facilities at Srikakulam in Andhra Pradesh and Miryalaguda in Telangana, as well as in oncology formulation manufacturing facility at Duvvada, Visakhapatnam in AP.