With expectations of a revival in the economy, various firms are lining up to buy back shares. This is despite Sebi’s move last year to tighten buyback norms.
Buybacks aggregating up to Rs 594.25 crore have been announced in last 11 days. UPL, formerly known as United Phosphorous, Mastek and Claris Lifesciences Ltd have announced buybacks recently. On Thursday, IT firm Mastek said it will buy back shares worth up to Rs 55 crore at a price not more than Rs 250 per share.
Between January and July 2013, before the buyback norms were amended, buybacks worth Rs 998.77 crore were announced. After the amendment, buybacks aggregating up to Rs 7,844 crore have been announced, data from Capitaline show.
Experts say these companies are going for buybacks as promoters expect the economy to revive in the coming quarters. “Companies traditionally use downturns for buybacks as they see higher valuations for the share in long-term,” said Rajat Rajgarhia, director (research) - institutional equities, Motilal Oswal Financial Services.
In an August 8 notification, Sebi made it mandatory for companies to spend minimum 50% of amount earmarked for buyback to ensure buybacks were not used just to shore up prices of their shares. Reliance Industries failed to meet buyback target last year with only 37.35% of the proposed offer amount used for the buyback.
Besides buybacks, a number of open offers are also likely to hit the market in the coming weeks. As per Prime Database, companies have lined up open offers aggregating up to Rs 6,492.79 crore for 2014. GSK Pharma’s open offer of Rs 6,389 crore, which begins on February 7, is the largest open offer so far for 2014.
Last year, companies used cash to the tune of Rs 36,608 crore via open offers to consolidate their holdings. However, Rs 5,193.26 crore was spent on buybacks.