Government-owned MOIL Limited- the largest producer of manganese ore by volume, on Wednesday informed the exchanges that it will buyback its 3.48 crore shares from the existing shareholders for about `863 crore from September 19. The buyback offer is for `248 per share, a little above its closing price of `247.20 a piece on Thursday at BSE.
The company has cash and equivalents of `2,850 crore as on March 31, 2016. The buyback offer will close on September 30, 2016. “The buyback has been authorised pursuant to the resolution passed by the Board of Directors of the Company on June 7,2016.
The maximum number of equity shares proposed to be bought back pursuant to the Buyback offer represents 20.72% of the total number equity shares in the paid-up share capital of the company,” the company said in a filing to BSE.
The buyback is proposed to be made from all the existing shareholders, including promoters of the company on a proportionate basis under the tender offer route. Promoters have 80% stake in the company as on March 31, 2016.
IDBI has been appointed by the company as the manager of the buyback offer. The buyback will result in a significant payout to the government. In May, the department of investment and public assets management (DIPAM)-directed public sector undertakings (PSUs) having a net worth of at least `2,000 crore and cash and bank balance of over `1,000 crore to buy back their shares. The government had set a divestment target of `56,500 crore for FY17 in this year’s Budget.
The BSE PSU has risen by 34.6% from the day of the Budget. The benchmark Sensex has gained around 23.4% during this period.
According to Securities and Exchange Board of India (Sebi) rules, 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 if the consideration does not exceed `100 crore.
Companies offer buybacks to enhance their value since the shares bought back are extinguished and the earnings per share gets a boost.