Sterlite Technologies: Share buyback plan

The board of directors of Sterlite Technologies have approved equity share buyback plan worth Rs 145 crore. Following the announcement, the share price of Sterlite Technologies surged nearly 13% at Rs 71.70, while the benchmark BSE Sensex was up 357 points, or 1.38% , at 26338 at around 10.45 am (IST).
The maximum buyback size represents 9.95% and 9.32% of aggregate of total paid-up equity share capital and free reserves of the company based on the audited standalone and consolidated financial statements as on March 31, 2019.
Post buyback, promoters’ stake in the company will increase to 54.95% against 53.63% as on March 20.
Sterlite Technologies does have institutional investors; and they hold 13% of the stock. This suggests some credibility amongst professional investors.
Twin Star Overseas, the promoter group company, owns 52% stake. L&T Investment Management (3.0%) and DSP Investment Managers (2.2%) are the other key institutional shareholders.
Sterlite Technologies became the first company to have announced a ‘share buyback’ amidst market rout.
It may be recalled that in the recent budget, finance minister Nirmala Sitharaman had announced a 20% tax on buy back of shares.
The past two years saw record buy back of shares, but companies are expected to shun share buy back due to the tax. Sterlite Technologies has now dared to attempt it when such a move is most required to stabalise the share price.

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