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Tuesday, May 08, 2001

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Markets | Next


Buyback offers propel activity

K.S. Badri Narayanan

WITH the Securities and Exchange Board of India (SEBI) deferring the decision on carry-forward system to May 14, the stock market is expected to move in a narrow band till such time.

As the market was expecting a clear and early signal from SEBI, its decision of postponement is likely to infuse insipidness into the stock market and leave the space for individual stocks to take direction.

If one would look at the recent happenings at the stock markets, this would clearly be visible as activity was centered around on few stocks, particularly which had come out with buyback proposals, and relegating the pivotals into sidelines.

Kesoram Industries came out with a buyback proposal and decided to buyback 15 per cent equity share capital of the company, from the existing shareholders at a maximum price of Rs 40.

The board of Kesoram also accepted the proposal of PricewaterhouseCoopers on merger of Hindustan Heavy Chemicals (HHCL) and Birla Century Finance (BCFL).

As per proposal, one share of Kesoram will be issued for every five shares of HHCL. And in the case of BCFL, it has been decided to issue one secured debenture of Rs 105 each (carrying interest rate of 12 per cent per annum and redeemable preferably with in a year) for every 10 BCFL equity shares of Rs 10 each.

Another company which came out with buyback offer was Great Eastern Shipping. The board of directors has decided to further buy back its own equity shares, up to Rs 100 crore at a price not exceeding Rs 42 per share from the open market through the stock exchange.

Great Eastern Shipping Co Ltd has posted a net profit of Rs 54.59 crore for the quarter ended March 31, 2001 as compared to Rs 32.28 crore in the corresponding period last fiscal. Total income is at Rs 323.79 crore (Rs 250.13 crore). For the year, it pos ted a net profit of Rs 177.40 crore (Rs 106.76 crore) and a total income of Rs 1,081.30 crore (Rs 994.46 crore).

Siemens was yet another company to come out with similar announcements. It has proposed a buyback programme of equity shares at a price not exceeding Rs 250 per share. The aggregate amount of the buyback will not exceed Rs 80.50 crore.

The company's German parent, Siemens AG, currently holds a majority stake at 51 per cent of the total equity. The balance is with financial institutions at 21.45 per cent and public and others at 27.55 per cent.

The proposed buyback would not result in a significant increase in the parent's stake. In fact, the resultant increase would be much less than 20 per cent.

With the market searching for direction, these announcements propelled activity around these stocks.

A slightly different announcement came from Raymond. The company indicated that it had bought back 1.37 million equity at Rs 186.25 crore at an average price of around Rs 136 per share and announced the discontinuation of buyback scheme from April 30 a s the target was achieved.

The buyback has been completed well ahead of the year-long time frame the company had given itself. The buyback has been completed at a price that is substantially lower the upper limit price of Rs 160 the company had indicated.

However, this announcement did not result in impact at the stock market for Raymond.

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