The total amount spent by firms to buy back shares has crossed more than R26,000 crore in the calendar year (CY) 2016, the highest since 2011, according to a report by Prime Database.
The total amount spent by firms to buy back shares has crossed more than R26,000 crore in the calendar year (CY) 2016, the highest since 2011, according to a report by Prime Database. Buybacks have significantly increased since January 2016 — the Street has witnessed 23 successful buyback offers worth R26,853 crore, which is a 20-fold jump compared with R1,263 crore of buyback offers in CY15, the data showed. NMDC was the biggest buyback from a PSU in this period. The state-owned company bought shares worth R7,527 crore.
Of the total buybacks in 2016, 63% or R17,047 crore was contributed by government-owned companies.
Share buybacks have become an effective tool for the government to meet its disinvestment target. According to the department of investment and public asset management (DIPAM) guidelines, any CPSE with a net worth of R2,000 crore and a cash and bank balance of R1,000 crore can exercise the option of a buyback.
The BSE PSU has risen by 13.57% from January till date with earnings per share of R249.33. The Sensex has gained 0.5 % in this period. Buyback activity in cash-rich PSUs also rubbed on to private companies with total spend by the latter on such offers touching R9,806 crore in CY16 — an eight-fold jump compared to CY15.
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Wipro was the biggest buyback during the period from private sector firms. The software major bought shares worth R2,500 crore from investors in June 2016.
The share repurchase of Allcargo Logistics will begin on Wednesday. Allcargo will buy back 64 lakh shares from the existing shareholders at R195 per piece. Infinite Computer Solutions has filed its letter of offer with the Sebi to buy back 56.60 lakh shares at R265 per piece.