Buyback Buzz Perks Up Digital Global

Digital GlobalSoft rose 0.40 per cent to Rs 655 in a negative market after hitting an intra-day high of Rs 693.80 following reports that the company might seek shareholder approval for its buy-back plan.

The scrip of the fifth largest software company in terms of market capitalisation of Rs 2,135.96 crore as on June 12, and recorded volumes of 13.55 lakh shares.

The rise in Digital follows reports that the company, at its annual general meeting on July 23, will be seeking approval from shareholders to buy back shares as well as to raise foreign fund investment limit in the company's equity to 49 per cent from 24 per cent. The latter measure is being undertaken in order to get higher weightage in the Morgan Stanley Capital International (MSCI) index.

 

The resolution, if approved by shareholders, will put to rest intense speculation about the scrip's future that has been agitating stock markets ever since the company's parent, Compaq, was acquired by Hewlett-Packard (HP). The price of the buy-back offer will be determined later.

However, it is almost certain that the buy-back offer will be priced at a premium over the ruling market rates. It is also not clear at this point whether HP will go for 100 per cent buy-back of shares to de-list Digital GlobalSoft from the Indian bourses, as is being practiced by many global majors now.

Earlier, Digital GlobalSoft announced that the merger between Hewlett Packard Company (HP), Heloise Merger Corporation, USA, and Compaq Computer Corporation, USA, was formally concluded and the launch of the new Hewlett Packard Company took place on May 7 in the US. Compaq Computer Corporation is the holding company of Compaq Computer Holdings, UK, that holds 51 per cent equity stake in Digital GlobalSoft.

HP and Compaq executives say the $21-billion merger will ultimately lead to $2.5 billion in annual cost savings and result in a 12 per cent increase in earnings. It also will result in the loss of at least 15,000 jobs out of a combined work force of 150,000 over the next two years.

Both HP and Compaq shareholders have voted in favour of the merger, in what is the largest ever in the computer industry. HP and Compaq had first announced their merger decision in September 2001.

For the fourth quarter ended 31 March 2002, Digital posted a 50 per cent rise in sales to Rs 93.77 crore and a 43 per cent increase in profit after tax (PAT) to Rs 26.56 crore. While revenues from Compaq increased 42 per cent to Rs 78.6 crore, revenues from the non-Compaq business were up 108 per cent to Rs 15.2 crore during the quarter.