Open offers, buybacks dip in 2014 as market rallies

A total of 61 open offers worth Rs 23,106 cr were made in 2014, under Sebi's Takeover Regulations

A sharp rise in stock prices in 2014 saw fewer promoters and investors launching open offers to acquire more shares from minority shareholders.

A total of 61 open offers, worth Rs 23,106 crore, were made in 2014, under the Securities and Exchange Board of India’s Takeover Regulations. The amount spent was 51 per cent less than the previous year. In 2013, Indian securities markets witnessed 81 open offers worth Rs 47,474 crore, according to data from Prime Database.

Pranav Haldea, managing director at Prime, said the reason for the sharp decline was the stock market rally and base effect due to Unilever Plc’s mega share repurchase programme in 2013. The latter had its biggest-ever voluntary open offer, worth Rs 29,220 crore (Rs 18,912 crore of shares were tendered), to increase its holding in Hindustan Unilever.

The benchmark indices rallied 30 per cent in 2014, with the broader markets doing so higher. “…2014 saw a strong, buoyant secondary market, which led to an increase in stock prices, which acted as a deterrent for open offers, buybacks,” said Haldea.

 

In all, 33 companies made buyback offers in 2014, to acquire a cumulative Rs 3,032 crore of shares, compared to nearly Rs 9,000 crore on offer. The largest completed buyback was of Cairn India at Rs 1,225 crore. In 2013, companies had acquired shares worth Rs 6,892 crore through buybacks.

Under a buyback programme, a company uses surplus cash to purchase shares from public shareholders. The shares bought are exhausted, unlike in open offers where these are acquired by the promoters.