Ramco Cements in a regulatory filing said it bought back 25 lakh shares worth Rs 167.70 crore. The shares were bought back at a price of Rs 670.80 per piece. So far in 2017 companies having bought back nearly Rs 30,000 crore worth of shares. Should the buybacks of Wipro and Infosys be successful, India Inc would have completed close to Rs 54,000 crore in 2017. This would be the highest amount ever raised via buybacks. In 2016, buybacks worth Rs 27,000 crore were completed. Equities have hit new highs; the benchmark Sensex has put on 19.78 % between January and now. At the current levels of 31,892.23, the gauge trades at a price -earnings multiple of over 18.75 times one-year estimated forward earnings. This is a big premium to the historical multiples. Much of the rally, market watchers say, has been driven by liquidity.
Post buyback the promoters’ holding has increased from 42.30% to 42.75%. The company further said post buyback, the paid up share capital would stand reduced from Rs 23.80 crore to Rs 23.55 crore. Buybacks appear to have become the preferred route for companies to return wealth to shareholders, especially since dividend income, of over Rs 10 lakh per annum, is taxable at 10% in the hands of all residents, domestic companies, trusts or funds except those established for religious, educational or charitable purposes.
The government is also using the buyback route to tap the coffers of cash-rich PSUs; it hopes to be able to meet its divestment target this way. Of the Rs 46,246.58 crore raised by the government through the disinvestment route in 2016-17, nearly Rs 19,000 crore after state undertakings offered their shares in buybacks. Buybacks are the process by which companies repurchase their shares from stakeholders. The bought-back shares are extinguished shrinking the firms’ equity base.