Sterlite Defends Buyback Strategy

Sterlite Industries has defended its decision to buy back shares in the manner and price at which the scheme of arrangement is being conducted.

The company today said the scheme of arrangement and buyback was part of the "restructuring that the company had embarked upon in order to achieve optimal capital structure to access international markets at appropriate valuation".

Sterlite's director-finance Tarun Jain said: "For overseas listing, the capital structure would play a very major role and therefore to achieve the desired structure, it was felt necessary that Sterlite reduce its capital."

Company officials also justified the process of buyback as a means of giving retail shareholders an exit opportunity since the company was undergoing a metamorphosis and that its profile was changing especially after its acquisition of Balco and Hindustan Zinc.

 

"We felt that in case there were investors who did not want to participate with this new risk profile they must be provided with an exit opportunity," Jain added.

Justifying the price at which the buyback is being done, the company said, "The purchase price represented a 43 per cent premium to the past six months average market price."

The company has maintained that only after obtaining all the required approvals under the law that the company has proceeded to implement the scheme.

On the issue of de-listing, Jain said Sterlite intends to delist from the bourses only in the event of the public shareholding falling below 10 per cent. It also said the company would provide as required by law, an exit option to shareholders in such a case.

On the progress of the buyback, senior company officials claimed that so far around shareholders accounting for about 25 per cent of the equity capital of the company of around Rs 28 crore had accepted the offer, while around 4,000 retail shareholders holding roughly 1.5 per cent of the equity capital have rejected the option to take part in the scheme.

This, however, does not include financial institutions which have decided not to take part in the buyback and which hold around 7 per cent stake in the company.