Eclerx surges 11% as board to consider share buyback proposal today

ICICI Securities believe the company has potential to do a buyback in the range of Rs 200-250 crore, which is around 10- 15 per cent of the company's market cap

Shares of Eclerx Services surged 11 per cent to Rs 528 on the BSE on Monday after the company said its board will meet later in the day to consider a share buyback proposal.

“A meeting of board of directors of the Company is scheduled to be held on Monday, July 6, 2020 to consider and approve, inter-alia, the proposal for buy-back of fully paid-up equity shares of face value of Rs 10 each of the Company,” Eclerx said in a regulatory filing on Friday after market hours.

As of March 31, 2020, the promoters held 50.76 per cent stake in technology process management company. Mutual funds held 21.11 per cent holding, followed by foreign portfolio investors (17.56 per cent) and individual shareholders (5.96 per cent).

During the financial year 2019-20, Eclerx had concluded the buyback of 1.75 million equity shares of Rs 10 each, at a buyback price of Rs 1,500 per share and total buyback amount of Rs 262 crore.

The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings (P/E) multiple.

Despite the sharp run-up today, Eclerx's stock has underperformed the market in the past one year by falling 29 per cent as compared to 8 per cent decline in the S&P BSE Sensex.

Analysts at brokerage firm ICICI Securities believe the company has potential to do a buyback in the range of Rs 200-250 crore (based on historical reference) which is around 10- 15 per cent of the company's market cap. This would keep up the momentum in the stock in the near term, it said.

At 09:51 am, Eclerx was trading 9 per cent higher at Rs 518 on the BSE, as compared to 0.96 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 402,000 equity shares changing hands on the NSE and BSE so far