Ajanta Pharma gains 5% on share buyback plan, board to meet on Dec 28

The board of directors of the company is scheduled to consider a proposal for buy-back of equity shares on Tuesday, December 28.

Shares of Ajanta Pharma were up 5 per cent at Rs 2,160 on the BSE in Friday’s intra-day trade after the company said its board will meet on Tuesday, December 28 to consider a share buyback plan.

“The meeting of the board of directors of the Company is scheduled on Tuesday, December 28, 2021 to consider a proposal for buy-back of equity shares including matters related /incidental thereto,” Ajanta Pharma said on Thursday after market hours.

Buyback is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than market price. When it buys back shares, the number outstanding shares in the market reduces.

Share buybacks are generally done to improve earnings per share, return on capital, return on net worth and to enhance the long-term shareholder value. Other reasons are to provide an additional exit route to shareholders when shares are under-valued or are thinly traded, enhance consolidation of stake in a company, prevent unwelcome takeover bids, return surplus cash to shareholders, achieve optimum capital structure, support share price during periods of sluggish market conditions and to service the equity more efficiently.

However, Ajanta Pharma has outperformed the market in the past one year, with stock having rallied 26 per cent, as compared to 21 per cent rise in the S&P BSE Sensex. In the past three months, the stock was down 3 per cent, against 5 per cent decline in the benchmark index. It had hit a record high of Rs 2,420 on July 29, 2021.

This is the third consecutive share buyback announcement made by Ajanta Pharma. In 2020, the company bought back 735,000 equity shares at a price of Rs 1,850 per share via tender route. In 2019, it bought back 769,230 equity shares at Rs 1,300 per share.

Ajanta Pharma is a specialty pharmaceutical formulation company engaged in the development, manufacture and marketing of quality finished dosages. The largest contribution of near 68 per cent of its business comes from a wide range of branded generic products in around 30 countries in Asia (including India) and Africa. Additionally, about 22 per cent comes from generics business in the USA and the rest comes from anti-malaria institutional business in Africa.