Buyback is a corporate action in which a company buyback its shares from the existing shareholders usually at a price higher than the market price. When it buys back, the number of shares outstanding in the market reduces.
The board of directors of IT (information technology) major HCL Technologies has approved a share buyback of Rs. 4,000 crore to reward investors. HCL Technologies will buyback 3.6 crore fully paid up equity shares representing 2.6 percent of the total paid up equity, at Rs. 1,100 per share. The buyback is at a premium of 9.5 percent to the Thursday’s closing price which was Rs. 1,005.30. The number of shares approved for buyback is up to 3,63,63,636 equity shares of Rs. 2 face value. The size of the buyback is 14.83 percent of the fully paid up equity share capital and 11.59 percent of the free reserves (including securities premium account). As of March 31, the cash and cash equivalents of the company stood at Rs 6,375 crore. Last year, the company had offered Rs 3,500 crore buyback, with a 17 percent premium on the then prevailing stock price. Analysts were expecting the buyback to be in the same line. Last month, India’s largest IT company TCS announced a mega buyback programme of Rs 16,000 crore at 15 percent premium to its share price on June 15. Last year, Infosys also completed its Rs 13,000 crore share buyback. The share price of HCL Technologies have risen 13 percent so far in 2018, compared to the 7.3 percent rise in benchmark S&P BSE Sensex Index. The market is also keen to know if HCL’s promoter- Shiv Nadar and his family- will participate in the buyback. As in the latest buyback of TCS they also told that their promoters will participate. Same is the case with Infosys which declared last year that Sudha Gopalakrishnan (wife of co founder S Gopalakrishnan) and Rohan Murthy (son of co founder NR Narayan Murthy) participated in the buyback. HCL Technologies share price ended at Rs 1,005.30, up Rs 10.25, or 1.03 % from its previous close of Rs 995.05 on the BSE.
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