Share buybacks see an uptick amid market fall

16 launched in 2015-16, up from 10 in 2014-15

Buyback of shares by domestic listed companies saw an uptick in 2015-16 amid a 10 per cent decline in the benchmark indices during the period.

According to Prime Database, 16 buybacks were launched in 2015-16, up from 10 in 2014-15, when the Sensex had rallied 25 per cent.

The value of shares purchased through buybacks in 2015-16 was Rs 1,708 crore, nearly four times that bought in 2014-15.

Experts say buybacks gain when stock prices are depressed. During 2015-16, the indices came off as much as 20 per cent due to fears of China-led global slowdown, before paring the decline to 10 per cent. Several stocks, particularly commodity ones, had corrected more than 50 per cent in 2015-16.

A stock buyback is a company's buying back its shares from the marketplace. You can think of a buyback as a company investing in itself, or using its cash to buy its own shares. The idea is simple: Because a company can't act as its own shareholder, repurchased shares are absorbed by the company, and the number of outstanding shares on the market is reduced. When this happens, the relative ownership stake of each investor increases because there are fewer shares, or claims, on the earnings of the company.

Bayer CropScience's Rs 506-crore buyback was the largest in 2015-16. Although buybacks saw an uptick in 2015-16, these were only a fraction of the Rs 5,666 crore purchased in 2013-14. Experts say the buyback momentum might continue if the stock market continues to be weak.

After correcting 12 per cent in the first two months of the calendar year, the benchmark indices saw a 10 per cent rally in March on the back of foreign inflows. Besides buybacks, delistings and open offers remained relatively subdued in 2015-16. In an open offer, an acquirer buys shares of an entity. According to Prime Database, nine delisting offers worth Rs 5,479 crore were made in 2015-16, of which eight were successful and one is still undecided. The largest delisting bid was of Essar Oil, worth Rs 3,745 crore, followed by that of Essar Ports, worth Rs 1,427 crore.

Meanwhile, 73 companies launched open offers worth Rs 11,795 crore in 2015-16. In comparison, 60 open offers worth Rs 17,352 crore were launched in 2014-15. Shares worth only a fraction (Rs 2,971 crore versus the open offer size of Rs 11,795 crore) were tendered by shareholders in 2015-16. In 2014-15, Rs 13,009 crore worth of shares were tendered by shareholders versus an open offer size of Rs 17,352 crore.

The largest open offer worth Rs 2,838 crore was launched by Suzlon Energy in 2015-16, compared to 2014-15's largest open offer worth Rs 11,449 crore by United Spirits.