Gaining for the second consecutive session, shares of Bayer CropScience rose 1.7% on Wednesday after the agrochemical and genetic food engineering firm received shareholders’ approval to buy back approximately 7.3% of its equity share capital.
Shares of the Mumbai-based company advanced 1.7% or R25.90 to settle at R1,550.80 a piece, thus erasing last week’s losses.
The company, through a special resolution, approved the buyback of a little over 28.79 lakh shares at a price of R1,580 apiece. The total buyback value is pegged at R455 crore.
Out of 3.047 crore votes polled, the company received around 3.045 crore or 99.93% votes favouring the buyback programme, the company said in its stock exchange filing.
Around 22,100 votes were against the buyback. As of quarter ending June, promoter holding stood at 71.1% in the company.
The buyback will take place through the ‘tender offer’ route as prescribed under the Sebi (Buyback of Securities) Regulations, 1998, which will also enable the promoters to participate in the buyback.
It is believed that the promoters would also tender a part of their shares in the offer so that the post-offer stake of the promoters does not breach the 75% mark.
Interestingly, Bayer is not the only company to announce repurchase of its own shares in recent months. Several other multinational corporations (MNCs) also announced a share buyback programme as the weak rupee and a tepid stock market make it cheaper for MNCs to acquire stake in their Indian subsidiaries.
Some of the notable companies that launched their buyback programme in the recent past include Crisil (McGraw Hill Financial), Hindustan Unilever (Unilever Plc), and Glaxo SmithKline Consumer Healthcare (Glaxo SmithKline Plc).
Market experts, however, recommend that investors sell shares in the open market as the acceptance ratio in a buyback offer is typically low.
Also, investors do not have to pay any long-term capital gains tax on shares sold in the open market if the holding period is more than a year.
As per the current regulations, shares tendered in buyback/open offer are considered to be off-market trades and do not attract any securities transaction tax (STT) but long-term capital gains (LTCG ) tax is levied. The gains are taxed at 10% without indexation or 20% with indexation.