The Cairn India board meets today to take a call on buying back shares worth a reported $1 billion, joining 46 others who have been acquiring shares since April this year, whether through mandatory open offers or buybacks. At R37,460 crore, the amount offered by them is the highest in several years and a 2000% jump over the corresponding period of 2012-13, according to Prime Database. Shareholders, for their part, tendered shares worth Rs 21,038 crore — 56% of the offer amount — and higher than R578 crore last year.
In April, Unilever Plc made a mega-offer for 48.7 crore shares of Hindustan Unilever, which would have cost $5.4 billion. The Unilever offer saw a fairly good 65.6% acceptance with investors believing that Rs 600 apiece was a reasonable price. The stock has since touched a lifetime high of 725 per share in end July. Multinationals like HUL and GlaxoSmithKline Consumer are consolidating their stakes in Indian subsidiaries, showing confidence in India’s long-term demand story. GSK did a buyback in January this year at R3,900 a share; had the company been able to buy back up to 75% of its equity, which was its objective, it would have spent Rs 5,200 crore. However, the buyback saw a 92% success rate.
In June this year, Sebi tightened the norms for buy backs. Companies now have to utilise at least 50% of the funds earmarked for a buy back from the earlier 25%. In addition, Sebi also reduced the maximum buyback period to six months from one year and asked companies to create an escrow account towards security for performance equivalent to at least 25% of the amount earmarked for buyback.
Also, a company will not be allowed to launch another buyback within one year of the conclusion of the previous buyback. The new norms also disable promoters from executing any form of transaction during the period.