R Systems soars 15% as board to consider share buyback proposal

Shares of R Systems International soared 15 per cent to Rs 211.45, also its 52-week high on the BSE in intra-day trade on Friday after the information technology (IT) consulting & software company announced that its board will consider share buyback proposal in their forthcoming board meeting. In the past one month, the stock rallied has 36 per cent, as compared to a 0.48 per cent rise in the S&P BSE Sensex.

“The board of directors of the company is scheduled to meet on August 06, 2021, to consider the proposal for buyback of equity shares of the company, quantum & mode of buyback, appointment of intermediaries and other matters incidental thereto,” R Systems International said in an exchange filing.

The company further said the board will also consider and approve the financial results of the company for the quarter and half year ended June 30, 2021 (Q1FY22).

As of June 30, 2021, the promoters held a 51.58 per cent stake in R Systems International, 48.42 per cent was in public shareholding and 36.85 per cent stake was held by a single investor Bhavook Tripathi, the shareholding pattern data shows.

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

A buyback allows companies to invest in themselves. By reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns. The reasons for buy-back are to improve earnings per share, return on capital, return on net worth and to enhance the long-term shareholder value. It also provides an additional exit route to shareholders when shares are undervalued or are thinly traded, enhances consolidation of stake in the company, prevents unwelcome takeover bids, returns surplus cash to shareholders and helps achieve optimum capital structure. Buybacks also support the share price during periods of sluggish market conditions and help to service the equity more efficiently.

At 09:43 am, the stock of R Systems traded 13 per cent higher at Rs 207.55 on the BSE, as compared to a 0.17 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled, with a combined around 1 million shares having changed hands on the NSE and BSE so far.