Buyback activity in cash-rich PSUs seems to have rubbed off on to private companies with the total amount spent by private sector firms on such offers touching R9,806 crore in the calendar year (CY) 2016.
Buybacks have significantly increased during the last 11 months, since January 2016, the Street has witnessed 23 successful buyback offers worth R9,806 crore — almost eight-fold jump compared with R1,263 crore of buyback offers in CY15, Prime data showed.
Wipro was the biggest buyback during the period. The software major bought shares worth R2,500 crore from investors in June 2016.
The share re-purchase of Eclerx services worth R234 crore opened on Monday. The Mumbai-based knowledge and the business process outsourcing company will buy back 11.7 lakh shares at R2,000 a piece, the company said in a regulatory filing. The share price of Eclerx rose by 8% since the buyback was announced.
Mumbai Vardhman Textiles has announced buy back of its shares worth R720 crores at R1,175 a piece. The government owned companies MOIL, Coal India, NALCO and Bharat Electronics have together spent R17,020 crore to buy back their shares.
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 R100 crore.
Companies offer buybacks to enhance their value since the shares bought back are
extinguished and the earnings per share (EPS) gets a boost.
The author is Sundar Sethuraman