According to company sources, Aurobindo's proposal involves buying back shares by the company itself and not by its promoters. But, even in this process, the promoters' shareholding will increase.
The company is planning to buy back shares as its market value today is less than its annualised turnover of about Rs 2,500 crore for 2007-08 and not more than four times the EBIDTA (earnings before interest, taxes, depreciation and amortisation) of about Rs 440 crore. "Aurobindo is the only major pharmaceutical company which has a PE of less than 5," analysts said.
Aurobindo has 54 million equity shares, whose market value is less than Rs 1,800 crore.
The stock hit a 52-week high of Rs 820 and a 52-week low of Rs 233 on the Bombay Stock Exchange. The shares gained by 1.04 per cent to end the day at Rs 340.95 on the BSE.
For the nine-month period ended December 31, 2007 (the company is yet to announce the 2007-08 fourth quarter results), Aurobindo posted an income of Rs 1,835 crore and an EBIDTA of Rs 324 crore. Its earning per share stood at Rs 24.96. If Aurobindo gets the Sebi nod, it could buy back shares up to 10 per cent of its networth, which stood at Rs 1,000 crore in 2006-07.
Incidentally, Bhagyanagar India, another Hyderabad-based company in which the promoters' stake is more than 55 per cent, also came out with a proposal for a buyback last month. However, the company's board of directors have decided to defer the proposal and deploy the company's funds on expanding operations.
