As Bajaj Auto gears up to use its hefty cash reserves to reward shareholders, data shows the buyback market has been quite popular among corporates. In the last one year, nearly four dozen companies have come out with their buyback issue.
Data accessed from Prime Database shows 45 companies bought back shares worth Rs 47,932.27 crore from their shareholders against a proposed Rs 48,306 crore. This does not include data for two offers launched in late December as they are yet to conclude.
The biggest buyback offers in the period was Tata Consultancy Services, which spent about Rs 17,000 crore in the last quarter. Wipro followed by buying back Rs 12,000 crore of its own shares while Larsen & Toubro bought back Rs 10,000 crore worth of shares.
On the other hand, a couple of companies failed to acquire the proposed amount of shares. BSE bought just 2.49 percent of the proposed buyback size while CL Educate bought back 56.77 percent of the proposed shares.
A buyback is when a company purchases its own shares in the stock market from existing shareholders. It is the most tax-efficient way to reward shareholders. Usually, the price at which buyback happens is seen as the price at which company values itself, and thus sock prices move towards the buyback price.
In India, it happens via two routes – market and tender. In the first mode, companies go to the open market to buy back their shares. Seven companies last year chose this route. In the tender route, shareholders tender their shares through a dedicated portal.
Stock performance after buyback
Interestingly, price performance has been mixed in the wake of a buyback. Nearly half of them have managed to surpass the buyback price. Among the best performers are Technocraft Industries, KDDL, and BSE that are up more than 100 percent from the buyback price.
On the other hand, there are some that have provided excellent exit routes for shareholders as their share price are far away from the buyback price. Tips Industries, Kama Holdings, Symphony, Axita Cotton and Aarti Drugs are the few that are 45-90 percent below their respective buyback price.
Bajaj Auto buyback
Bajaj Auto, in a regulatory filing, said that its board will “consider a proposal to buy back fully paid-up equity shares of the company" in a meeting on January 8.
Talking to CNBC-TV18, Rajiv Bajaj, CEO, Bajaj Auto said that the buyback is an efficient way to return capital to shareholders. The rationale is that they have had an outstanding quarter, he said.
The company, at the end of September 2023, had surplus funds at Rs 17,326 crore even after dividend distribution of more than Rs 4,000 crore during the quarter. The cash reserves as of December 2023 are not known publicly.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
