In a strategic move, the board of Bajaj Auto has greenlit a substantial Rs 4,000-crore share buyback plan, offering shares at an impressive price of Rs 10,000 per share. This decision was announced on Monday after market hours, sending ripples of excitement through the financial community.
The repurchase price of Rs 10,000 per share reflects a whopping 43% premium over the closing price of Bajaj Auto’s two-wheeler firm on the BSE on Monday. The Pune-based company disclosed that its board has given the nod to buy back 4,000,000 shares, equivalent to 1.41% of the total equity shares of the company.
The buyback will be executed through the tender offer route, and the purchase price will be settled in cash, with a total consideration not exceeding Rs 4,000 crore. Bajaj Auto clarified that the mentioned amount excludes transaction costs, encompassing brokerage, filing fees, advisers/legal fees, public announcement publication expenses, printing and dispatch expenses, and applicable taxes such as buyback tax, securities transaction tax, goods and services tax, and stamp duty.
Bajaj Auto further emphasized that the buyback represents a significant proportion of the total paid-up equity share capital and free reserves, standing at 16.33% and 14.49% respectively, based on audited standalone and consolidated financial statements for the financial year ended March 31.
Market observers are anticipating a robust rally in Bajaj Auto shares on Tuesday, given the substantial premium at which they will be repurchased. While the promoters currently hold nearly 55% of the company, it remains uncertain whether they will actively participate in the buyback program.
The remaining stake in Bajaj Auto is distributed among domestic institutions, including mutual funds, insurance companies, banks, Indian public, and foreign portfolio investors. In a buyback scenario, a company acquires its own shares from the market or shareholders, subsequently extinguishing them, often viewed as a positive move to enhance shareholder value and confidence. The unfolding buyback initiative by Bajaj Auto is poised to have significant implications in the financial landscape.
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