The last two years have witnessed a huge surge in buyback offers. According to SMC Capitals, the number of companies which declared buyback during 2008 and 2009 was nearly 63. Of the 63 buyback programmes announced, about 43 plans have come to the end of their permitted time. And, the remaining 20 programmes are ongoing.
In the case of 43 buyback programmes that came to the end of their permitted time, only 49.1% have materialised.
In terms of value, the announced buyback is about Rs 4,929 crore. However, the companies have actually bought back only Rs 2,418 crore.
Out of 43 cases, 12 companies bought back 100% of their announced programme. Some of them are Eicher Motors, Gujarat Fluorochemicals, Great Offshore and SRF.
On the other hand, some of the prominent companies whose buyback programmes came to the end of their permitted time but have actually bought back lower amounts are DLF (actually completed only 13%), Bosch ( 31%) and Monnet Ispat & Energy (24%).
The buyback programme has seen increasing popularity among MNCs which can be gauged from the growing number of open offers made by them.
By the time the buyback announcement becomes public, the share price already jumps significantly. Typically, it is seen that retail investors enter when they see upward movement of the share price, but once a buyback announcement comes in, share prices start to dip lower and lower.
Kishore Ostwal, CMD, CNI Research, said, ? The number of buyback was high in the recent years for two reasons. The share prices were correcting which was an opportunity for companies to increase promoter stake. Secondly, all these companies were having cash in their book of accounts but did not have any opportunity to invest in projects due to sudden slowdown in the economy.?
Nearly 40% of the companies studied have shown a decline in their share prices though the market as a whole was in positive mood. More than 22% of the companies have seen their share price decline by over 10% from April 1, 2008, and some companies declined by as much as 74%.
Despite better net profit during the second quarter, some companies showed downturn in the market. They include Madras Cements, Great Offshore, Godrej Industries, Alembic, India Infoline, Reliance Infrastructure and Aventel Ltd. On the other hand, 33 companies registered a rise in their prices since April 1, 2008. Some of them are Eicher Motors, EID Parry India, Ipca Laboratories and HEG Ltd.