SKF India, in a regulatory filing, said it has repurchased 13.94 lakh shares worth Rs 209 crore. This represents 53.64% of the shares SKF India intended to buy back from its shareholders. The buyback was made from all the existing shareholders of the company on a proportionate basis under the tender offer route. ICICI Securities was the merchant banker for the buyback. Post-buyback, the promoter holding has been reduced from 53.58% to 52.32%. In 2017 so far, companies have bought back shares worth nearly Rs 30,000 crore.
Buybacks appear to have become the preferred route for companies to return wealth to shareholders, especially since dividend income, of over Rs 10 lakh per annum, is taxable at 10% in the hands of all residents, domestic companies, trusts or funds except those established for religious, educational or charitable purposes.
The government is also using the buyback route to tap the coffers of cash-rich PSUs; it hopes to be able to meet its divestment target this way. Of the Rs 46,246.58 crore raised by the government through the disinvestment route in 2016-17, nearly Rs 19,000 crore after state undertakings offered their shares in buybacks. Buybacks are the process by which companies repurchase their shares from stakeholders. The bought-back shares are extinguished shrinking the firms’ equity base.