Indian IT company HCL Technologies has announced a Rs 4,000-crore share buyback plan, involving up to 3.63 crore shares at a price of Rs 1,100 per equity share. The HCL Technologies stock fell nearly 2% on Friday post news of share buyback offer.
Shares of HCL Technologies closed 1.03 per cent higher on the BSE to Rs 1,005.3 on Thursday. The buyback was announced after market hours yesterday.
The buyback price translates into a 9.4 per cent premium over Thursday's closing price of HCL Tech shares.
In a regulatory filing, HCL Technologies said: "...the board of directors of the company, in its meeting held today...have approved the buy-back of up to 3,63,63,636 fully paid up equity shares of the company of face value of Rs 2 each...at a price of Rs 1,100 per equity share payable in cash..."
The total number of shares that the company proposes to buy back represents 2.61 per cent of fully paid up equity shares of the company, while the buyback size stands at up to Rs 4,000 crore.
"The buyback is proposed to be made from the shareholders of the company on a proportionate basis, through the tender offer route...," the statement added.
It is subject to the approval of the shareholders of the company through special resolution, it said.
As on July 11, 2018, promoter and promoters group held just over 60 per cent of the existing equity share capital of the company, while the holding of foreign investors stood at 26.85 per cent.
Indian financial institutions alongwith banks, insurance companies and alternate investments funds held close to four per cent in the company, and Mutual Funds another 5.51 per cent. The shareholding of Bodies corporate and trusts, and resident individuals stood at about 0.94 per cent and 2.45 per cent, respectively.
The move by the company comes less than a month after its larger IT peer Tata Consultancy Services approved a plan to buyback shares up to Rs 16,000 crore.
Credit Suisse on HCL Technologies
The brokerage has maintained outperformed rating on the stock with a target price of Rs 1,175 per share. The stock has significantly underperformed many of its peers. It has been one of its preferred picks on combination of double-digit growth, stable margins and return on equity.
Morgan Stanley on HCL Tech
The brokerage has maintained overweight rating on the stock with a target price of Rs 1,060. It expects buyback to be largely neutral to FY19 EPS Buyback proposal in line with the co's policy of returning 50% of its net income to shareholders (through either buybacks or dividends).
Motilal Oswal on buyback
The buyback should result in 2% accretion to earnings per share from a reduction in the share count and lower other income because of the cash outgo. Given the reduction in networth, it should also lead to betterment of the return ratios by 2 percentage points.