Buybacks ignored as markets rally

Four companies, who have announced buybacks, mop up less than one-third of the proposed number of shares

The rally in stocks on the back of a decisive election mandate is likely to throw buyback plans off-track.Shares of these companies have rallied significantly and are trading higher than the maximum buy-back price leaving investors no incentive to participate.

 

There are currently four companies with buybacks ongoing, according to BSE data. These include Edelweiss Financial Services, Supreme Petrochem, DCM Shriram and ISGEC Heavy Engineering. 

 

ISGEC Heavy Engineering is currently trading at a 162% premium to the maximum buyback price. DCM Shriram Limited shares are trading 75% higher than what the company is offering. Supreme Petrochem and Edelweiss Financial Services are trading at a 12% and 34% premium respectively to the buyback price.

 

 

All the companies have completed less than 30% of their proposed buyback, with percentage completion for most in single digits. Since the market price is higher than the buyback price, there is no incentive for the investor to tender shares in the buyback. 

 

Interestingly, all the buybacks were announced before the election results. The latest was Supreme Petro, which announced its buyback on May 9th, one week before the election results were announced on May 16th.

 

Edelweiss announced it on May 5th. DCM and ISGEC announced it in March and January respectively.