Bajaj Consumer Care board on Friday approved a proposal to buy back shares worth Rs 81 crore via the open market route. “The board has approved the buyback of fully paid up equity shares having a face value of Re 1 each of the company at a price not exceeding Rs 240 per equity share for an aggregate amount not exceeding Rs 80.89 crore,” the company said in an exchange filing, adding that the maximum shares to be bought back under the buyback plan is 33 lakh. Bajaj Consumer shares surged more than 3 per cent to Rs 184 apiece on the BSE in afternoon deals after share buyback news.
Share Buyback details: Price, Size
“The board of directors of Bajaj Consumer Care Limited at its meeting held today, i.e., December 9, 2022, has considered and approved the proposal for buyback of fully paid up equity shares of the company having a face value of Re 1/- (Indian Rupee One Only) from all shareholders/ beneficial owners of the Equity Shares of the Company, through the “open market” route, at a price not exceeding Rs 240/- per Equity Share, for an aggregate amount not exceeding Rs 8,089 lakh,” the company said.
“The indicative maximum number of equity shares proposed to be bought back at the Maximum Buyback Size and Maximum Buyback Price under the Buyback would be 33,70,416 Equity Shares (representing approx. 2.28% which is less than 25% of the total number of Equity Shares in the paid-up equity capital of the company as of March 31, 2022), Bajaj Consumer’ regulatory filing further said. According to the exchange filing, Bajaj Consumer’s buyback offer size represents 9.66% and 10% of the aggregate of the company’s fully paid-up equity capital and free reserves as per the latest standalone and consolidated audited financial statements of the company, respectively, for the financial year ended 31 March 2022, which is not more than 10% of the aggregate of the total paid-up capital and free reserves of the company.
What is a share buyback?
A share buyback is when a company looks to purchase its own stock in order to lower the number of shares accessible on the open market. There are several reasons for why a company would consider a share buyback. Sometimes companies do this in an attempt to raise the value of the remaining shares by reducing the availability of the scrip or even preventing alternative shareholders from gaining a majority stake in the corporation. . It is often considered an alternative, tax-efficient way to return money to shareholders.
Since a buyback reduces the number of shares that can trade hands, it inadvertently raises the earnings per share (EPS). The value of the remaining stock is then higher since the EPS has been raised. Once a company buys back its stock, the shares are canceled since they are no longer publicly traded or held.
Bajaj Consumer Care is one of the leading FMCG brands in India. At present, promoters and promoter groups hold a 38% stake in the company and foreign institutional investors hold an 11.51% stake. So far this year, Bajaj Consumer Care shares have fallen more than 8 per cent. However, it has jumped 30 per cent in the last six months. The stock was quoting at Rs 180, up 1.40 per cent on NSE intraday.