Internet search company Just Dial has announced a buyback plan while shelving earlier programme to raise Rs 1000 crore citing a weak market that is â€œright now like a bubble with frothy valuations.â€
Internet search company Just Dial has announced a buyback plan while shelving earlier programme to raise Rs 1000 crore for acquisitions.
"We realised that the valuation levels were so stretched there is no point doing any acquisition at this point of time," Just Dial CFO R Krishnamachari told CNBC-TV18.
With company generating nearly Rs 200 crores every year, Krishnamachari said that investing cash into buyback was the most optimal solution.
He said the company will be buying back, through a tender process, a total of 1.2 million shares amounting to Rs 170 crore. The company's board has approved a buyback at maximum of Rs 1,550 per share and the process will take around 3-4 months to complete. This buyback will be made up of 25 percent of the paid up equity and the reserves of the company, he added.
Just Dial listed on the bourses in June 2013. Shares of the company closed 1.5 percent up at Rs 1,109.65 on Thursday.
Below is the transcript of Ramkumar Krishnamachari’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: How much is the total amount of money that you have put aside for this buyback?
A: It is roughly around Rs 170 crore.
Latha: Is there any time period by which you will exhaust this Rs 170 crore?
A: It will all depend. Next we have to get shareholder approval and post that the tender process normally takes may be 3-4 months for the process to get completed.
Latha: There will be a tender process?
Latha: You are not buying from the market?
A: No, it is a tender process.
Latha: How much will it mean in terms of number of shares, can you give us an idea?
A: Roughly it will be about 1.2 million shares.
Sonia: What is the total cash on your books at this point?
A: Roughly around Rs 850 crore. If you take the market value, it may even touch around Rs 885-900 crore.
Latha: What is the reason for this buyback that you have announced? Sometime back you all were planning to raise money and now you are planning to give back money. What is the thought process?
A: Earlier, 6 months back, when we came out with the enabling resolution perhaps we came ahead of time. We thought that its good to have an option given the way the entire space is playing out and the amount of capital which is going; but then we realised that the valuation levels were so stretched there is no point doing any acquisition at this point of time.
Then came the question of what do you do with the cash. We have cash and every year, we are generating roughly about Rs 200 crore of cash. We felt, as a board, the optimal view between a high dividend and the buyback is buyback at this point in time.
Sonia: Now you have scrapped your plans to raise money? You had about Rs 1,000 crore of fund raising that you were looking at?
A: At least this put a rest to capital raising at this point of time. At least next 6 months, we can’t raise capital and we don’t have intention of doing that.
Sonia: Is this a fixed price buyback?
A: Tender. Normally the process is that you exit the price at which we will be buying back.
Latha: You said upto Rs 1,550, so each one gets the price that they tender in, is it?
A: Absolutely.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.