Financial Daily from THE HINDU group of publications
Wednesday, Apr 03, 2002
Markets - Buyback
Precot Mills to buy back shares -- Pegs offer price at Rs 33
COIMBATORE, April 2
THE city-based Precot Mills Ltd has come out with a buy-back offer for 10 lakh equity shares through the tender offer route.
The board, which met here today to finalise the buy-back arrangement, put the offer price at Rs 33 per share.
The company has proposed to send offer letters to the shareholders by the second week of May. The offer will be open between June 1 and 30.
The sources told Business Line that post-buyback, the promoters holding in the company would to go up from the present 57 per cent of the 60 lakh equity shares to 66 per cent. While the total shares held by the promoters now stood at 34 lakh (of Rs10 face value), 26 lakh shares were held by outsiders. The number of equity holders is around 4,500. The last trading of the scrip on the NSE was in October at Rs 40. On the Madras Stock Exchange, the last trading was in the last week of February when it was quoted at Rs 32. The traded price for the scrip had at times fallen below Rs 30.
The board took note of a few other textile companies with similar product/manufacturing bases, whose equity bases and turnovers that almost matched with that of Precot and also the market prices of their scrips while arriving at the offer price.According to company sources, Precot Mills has decided on the buy-back largely to impart liquidity to the shareholders who hardly see any trading in the Coimbatore or Chennai exchanges, where the scrip is listed.
TheNSE allowed trading under the permitted list, but this too was withdrawn in November. The scope for the scrip being listed in other exchanges became almost impossible due to the low market capitalisation of around Rs 20 crore. Listing in exchanges now requires the minimum market capitalisation at Rs 25 crore or its paid-up capital should be minimum Rs10 crore.
The company foresees no possibility of its equity capital base going up beyond Rs 6 crore in near future.
In this background, the company feels that for investors stuck with low capital appreciation, the buy-back will give an exit option, especially in the light of the limitations in getting higher dividend yields.
Though the book value of the scrip may be higher, it may not be of any use to the shareholders.
During the stock market boom in 1995, the scrip was quoted at around Rs 500 per share.
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