The board of directors of six companies – Orbit Exports, Pidilite Industries, eClerx Services, Aarti Industries, Lovable Lingerie and Gandhi Special Tubes – approved buyback plans aggregating nearly Rs 958 crore in the past one month.
Most of these companies announced buyback through the tender route, under which repurchases were executed using a fixed price tender offer. While a share buyback does not impact a company’s business, there is a financial impact to the extent that the cash and the number of shares in its books reduce.
Since buyback reduces outstanding shares, it boosts EPS (earnings per share) and, therefore, the share price. In tender offer, the company makes an offer to buy a certain number of shares at a specific price directly from shareholders.
Buyback of equity shares by companies has hit a record high in the current financial year 2017-18 (FY18), with 32 companies acquiring shares worth Rs 486.39 billion till December 2017. In previous financial year 2016-17 (FY17), total 49 companies had acquired shares amounting to Rs 339.31 billion, the Prime Database shows.
Except Lovable Lingerie, the remaining eight stocks have outperformed the market by surging up to 42% after announcement of buyback plans. Gandhi Special Tubes soared 42%, while Aarti Industries and eClerx Services rallied 23% and 18%, respectively. Unichem Laboratories, SJVN, Aarti Drugs and Orbit Exports gained more than 5% each.
|Name||in million||in Rs||price (Rs)||Chg*|
|Gandhi Special Tubes||0.9||500||439.45||42.2|
|* over price one day prior to share buyback annoucement|