Shares Buyback: BSE Hikes Buyback Offer Price, Fixes Record Date; Stock Hits New 52-Week High

The share price of stock exchange, BSE propelled on NSE to hit a new 52-week high of Rs 1,134.60 apiece. So far on Friday, the stock has rallied by nearly 7% on the exchange. The reason behind the strong buying is due to BSE's board of directors fixing a record date and hiking the floor price for the nearly Rs 375 crore buyback shares offer. Investors are upbeat as they look forward to BSE's buyback.

As per the regulatory filing on NSE, BSE's board approved the record date for the purpose of determining the entitlement and the names of the shareholders who shall be eligible to participate in the proposed Buyback, i.e., Thursday, September 14, 2023.

Further, the board approved increasing the buyback floor price from Rs 816 per equity share to Rs 1,080 per equity share payable in cash, for an aggregate maximum amount not exceeding Rs 374.80 crore.

At the revised buyback offer price, the equity shares to be bought back are to the tune of 34,70,370 equity shares, representing 2.56% of the total number of Equity Shares in the total paid-up equity capital of the Company as of March 31, 2023.

The buyback shares have a face value of Rs 2 each.

On NSE, at the time of writing, BSE stock traded at Rs 1,123.80 apiece, zooming by Rs 61.05 or 5.74%. The stock touched a new 52-week high of Rs 1,134.60 apiece earlier in the day.

From the current market price, the revised buyback offer price is at a discount of nearly 4%. However, compared to Thursday's closing price of Rs 1,062.75 apiece, the revised floor price in the buyback is at a nearly 2% premium.

Buy-back is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than the market price. When it buys back, the number of shares outstanding in the market reduces.

In simple words, a buyback allows companies to invest in themselves.

Some of the key reasons for buyback are --- to improve earnings per share; improve return on capital, return on net worth and to enhance the long-term shareholder value; provide an additional exit route to shareholders when shares are undervalued or are thinly traded; provide an additional exit route to shareholders when shares are undervalued or are thinly traded; enhance consolidation of stake in the company; prevent unwelcome takeover bids; return surplus cash to shareholders; achieve optimum capital structure; support share price during periods of sluggish market conditions; and service the equity more efficiently, as per BSE FAQs.

By reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns. Buybacks can be carried out in two ways. These are:

Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them.

Companies buy back shares on the open market over an extended period of time.