Buybacks by firms jump 10x to Rs 5,987 cr; NHPC biggest share repurchase offer in 2017

Mumbai | April 13, 2017 3:36 AM

Buyback activity amongst cash surplus companies continues with 14 companies repurchasing shares worth `5,987 crore in the first three months of 2017.

Sundar Sethuraman

Buyback activity amongst cash surplus companies continues with 14 companies repurchasing shares worth `5,987 crore in the first three months of 2017. This is 10 times higher than the `552.85 crore worth of buybacks during the same period in 2016, data sourced from Prime database showed.

In 2016, firms spend more than `26,853 crore on buybacks, the highest since 2011. NHPC’s buyback has been the biggest share repurchase offer in 2017 so far. The state-owned hydropower producer bought back shares worth `2616 crore. NLC, another state-owned company which is engaged in the mining of lignite and generation of power through lignite based thermal power plants, bought back shares worth `1,476.49 crore.

Among the private sector companies, Vardhman Textiles bought back shares worth `719 crore. KPR Mills, Sasken Communications, Hexaware Technologies and Balrampur Chini were among the other private sector companies that completed their buybacks in past three months.

The government’s dependence on the coffers of cash-rich PSUs to meet its divestment target and the new additional dividend tax regime are attributed as the reasons behind this trend. Of the `46,246.58 crore raised by the government through the disinvestment route in FY17, `18,963.47 crore came through buybacks.

Buybacks have also become the preferred route over dividends as dividend income in the hands of all residents, domestic companies, trusts or funds except those established for religious, educational or charitable purposes, attracts an additional dividend tax of 10 % on dividend income over `10 lakh
a year.

Many marquee names are set to conduct their buyback offers in CY 17. The board of TCS, the largest IT company in terms of revenue and market capitalisation, approved a proposal to buyback shares worth `16,000 crore in February 2017. This is the biggest repurchase after Reliance Industries’s buyback worth `10,440 crore in 2012.

TCS’s offer came a week after US-based software services player Cognizant Technology Solutions, which has centres in India, announced plans to buy back shares worth $3.4 billion.

On March 15, the board of HCL approved the proposal to buyback for an amount of `3500 crore, for 3.5 crore shares.
Buyback is the process by which a company repurchases its own shares from its stakeholders. The bought back shares are extinguished and the company’s equity base shrinks.

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