India's market regulator has allowed travel company Thomas Cook India to withdraw a share buyback offer, agreeing with the company that the coronavirus pandemic's financial impact had made the plan "impossible".
Thomas Cook’s board in February 2020 agreed to carry out a Rs 150-crore share repurchased programme, but lockdowns and travel restrictions disturbed that plan.
The company approached the Securities and Exchange Board of India (Sebi) to withdraw the offer, citing cash burn during the June 2020 quarter.
In an order on Thursday, Sebi said if Thomas Cook is compelled to carry out the buyback it will “result in an adverse effect on the business of the company and in turn, its shareholders. While treating this as a unique case, I am inclined to exercise powers under Regulation 28(i)(b) read with Regulation 28(iv) of the Buy–back Regulations, 2018 and allow the request for withdrawal.”
“At this stage, it cannot be disputed that the Covid–19 pandemic has now made it impossible for Thomas Cook to go ahead with the buyback offer. Further, such impossibility had occurred without any fault of the company and was also beyond its control,” the order further said.
In its submission to Sebi, Thomas Cook said its reported cash and bank deposits had dropped by Rs 146 crore to Rs 245 crore during the three months to June 2020.
For the quarter ended December 2020, it reported a loss of Rs 89 crore on a consolidated basis. In the same quarter of previous year, it had reported profit before tax of Rs 16.8 crore on a consolidated basis.
Thomas Cook told Sebi that if directed to complete the buyback “it will not be in a position to spare any cash and the viability and continuity of the company, as a going concern, may be severely threatened on account of the company’s financial position having undergone substantial deterioration due to the Covid–19 pandemic.”
Shares of Thomas Cook closed at Rs 47 on Thursday. The proposed buyback was to be done at Rs 57.5 per share.