Novartis India, which sells the oncology drug Glivec, said on Thursday it will buy back shares worth Rs 290 crore. In a stock exchange filing, the pharmaceutical company said it would acquire close to 38 lakh shares at a price of Rs 760 a share. The buyback price is an 11% premium to the three-month weighted average share price of the stock.
Volumes in the counter were 65,000 on BSE, while the two-week average is 48,000 shares.
However, the buyback price is at a discount of 8% to its closing price of Rs 824.85 on Thursday. The deviation in the price is due to the 17.2% rally in the stock since the company announced its buyback plans on Tuesday.
Novartis has Rs 985 crore of cash and cash equivalents on its balance sheet. The company reported a net profit of Rs 198 crore in FY16 on revenues of Rs 768 crore. For FY16, the company paid a dividend of Rs 10 on a share with a face value of Rs 5.
Currently, the promoter of the pharmaceutical company- Novartis AG holds 75% of outstanding equity in the Indian subsidiary. SEBI’s listing guidelines require a minimum free float of 25%; this would imply that the promoters, namely Novartis AG would need to tender shares in the buyback should it want the Indian subsidiary to stay listed.
With stocks trading at reasonable valuations, managements that have surplus cash have been tempted to pick up shares in their companies. On Wednesday, state-owned NALCO announced its buyback for an amount of Rs 2,834 crore.