Share buybacks: Rs 25,000 cr mark crossed, but no reason for India Inc to rejoice; here’s why

By: | Published: September 29, 2016 6:14 AM

The total amount committed by listed Indian companies to buy back their own shares so far this year has crossed the R25,000-crore mark, data sourced from Prime Database reveals.

The total amount committed by listed Indian companies to buy back their own shares so far this year has crossed the R25,000-crore mark, data sourced from Prime Database reveals.

However, this might not necessarily be a sign of optimism in the boardrooms of India Inc since close to two-thirds of this list is accounted for by public sector undertakings (PSUs).

In order to tap into the coffers of cash-rich PSUs and achieve its disinvestment target of R56,500 crore, the government has asked several listed PSUs to go for buybacks wherein the government tenders its shares.

3333333Set to start from October 3, Coal India is planning to buy back 1.7% of its total outstanding shares at R335 per piece —slightly above Wednesday’s closing price of R328 on BSE. The maximum value of buyback will be R3,650 crore. The state-controlled coal mining company has R40,089 crore of cash and equivalents on the books, as per Bloomberg.

Buyback activity among companies seems to be picking up in 2016. From the beginning of 2016 till now, 23 companies have come with buyback offers worth R25,454 crore — an almost 20 times increase compared with R1,281 crore of buyback offers in 2015.

NMDC was the biggest company to buy back shares during this period. The government-owned mineral producer offered to buy shares worth R7,527 crore from investors in July 2016. In terms of the shares bought back, National Aluminium Company’s was the biggest offer, as it bought shares worth R2,834 crore on Tuesday.

Apart from Coal India, Bosch India’s buyback offer worth R2,019.76 will begin on October 6. On Monday, board of directors of Vardhman Textiles approved buyback of 61.3 lakh shares worth R720 crore. Vardhman Textiles shares gained nearly 7% intraday after the announcement.

Government-owned MOIL — the largest producer of manganese ore by volume — began the buyback of 3.48 crore shares from the existing shareholders for about R863 crore on September 19.

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