 "Bajaj Auto board to consider share buyback on Jan 8, stock jumps over 5%")
Shares of Bajaj Auto rose about 6 per cent on Wednesday to hit a new life-time high after the company said its board would consider a share buyback proposal on January 8. The stock touched a high of Rs 7,059.75 on the BSE in intra-day trade before settling 5 per cent higher at Rs 6,989.40 apiece.
In June last year, the company had done a share buyback worth Rs 2,500 crore at a price of Rs 4,600 per share.
Under the Sebi regulations, the maximum limit for a buyback is 25 per cent or less of the paid-up capital and free reserves in that financial year.
The company generated over Rs 3,600 crore of free cash flow in the first half of 2023-24, which was 1.6-times higher than that in the year-ago period. It had Rs 17,326 crore of surplus funds on its balance sheet as of September 30, 2023, after dividend distribution of Rs 4,000 crore during the quarter.
Bajaj Auto’s net worth as of September 30, 2023 was Rs 29,331 crore. At the end of March 2023, the auto major’s equity capital plus free reserves (retained earnings and general reserves) stood at Rs 24,494 crore. Based on these numbers, the buyback amount could be around Rs 7,300 crore.
In a regulatory filing on Wednesday, the company said it would consider a proposal to buy back fully paid-up equity shares and other matters “in accordance with the applicable provisions of the Companies Act, 2013 (including the rules and regulations framed thereunder), the Securities and Exchange Board of India (Buyback of Securities) Regulations, 2018, and other applicable laws”.
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Bajaj Auto Managing Director Rajiv Bajaj said in an interview with CNBC-TV18 that the buyback was an efficient way to return capital to shareholders. The rationale was that the company had had an outstanding quarter, he said.
He indicated that the upcoming buyback could be larger than last time. “Whenever cash on books crosses Rs 15,000 crore, we look to give back to investors,” he added.
The company reported a 22 per cent year-on-year increase in sales of two-wheelers in the domestic market in the April-December 2023 period at 1,703,704 units. Its exports, however, dipped by 17 per cent to 1,107,402 units in the same period, primarily due to geopolitical tensions and macroeconomic factors.