GAIL (India) Limited has approved a buyback of about 5.70 crore shares at Rs190 per share aggregating about Rs1,083 crore (excluding taxes). The buyback price of equity shares is at a 24 per cent premium on the March 30, 2022, closing price at NSE. The decision was taken by the Company’s Board of Directors at its meeting held this week to consider the buyback of the fully paid-up equity shares of the Company. The Board approved the buyback of about 5.70 crore shares through a tender offer representing 2.50 per cent of its paid-up capital and free reserves as of March 31, 2021.
GAIL: Expected Returns
“GAIL share buyback at Rs190 per share is attractive based on CMP. The buyback will result in a 1.5 per cent reduction in the total number of shares outstanding and cause a marginal uptick in future EPS. The stock is currently trading at 6.1x EV/EBITDA 1Yr Fwd, which is lower than its 5Yr avg of 7.1x due to the headwinds in the sector. As per our analysis, the buyback can provide a return of 10 per cent to 20 per cent based on CMP & acceptance ratio of 50 per cent to 100 per cent, for short term investors,” said Sethumadhavan KS, Analyst at Geojit Financial Services.
The board of directors of GAIL approved the “buyback of about 5.70 crore shares at the rate of Rs 190 per share aggregating to about Rs 1,083 crores (excluding taxes),” the company said in a statement. The buyback price of equity shares is at a 24 per cent premium over Wednesday’s close price at NSE. GAIL had in 2020-21 spent Rs 1,046.35 crore on a similar share buyback.
GAIL: What is a Buyback?
A share buyback, also known as a share repurchase, is a corporate action to buy back its own outstanding shares from its existing shareholders usually at a premium to the prevailing market price. It can be an alternative tax-efficient way to return money to shareholders. Share buybacks reduce the number of shares in circulation, which can increase the share value and the earnings per share (EPS).
GAIL: Record Date
The company has fixed Friday, April 22, 2022, as the record date for the purpose of ascertaining the eligibility of shareholders for the buyback of equity shares. The buyback will be offered on a proportionate basis through a tender offer route in accordance with the Sebi Regulations, 2018.
GAIL: Offer Size
The buyback size represents 2.50 per cent the aggregate of the fully paid-up equity share capital and 2.22 per cent of free reserves as per the audited standalone and consolidated FY21 financial statements of the company.
The buyback offer size, GAIL said, does not include any expenses incurred or to be incurred for the buyback like filing fees payable to the Securities and Exchange Board of India, advisors fees, public announcement publication expenses, printing, dispatch expenses, applicable taxes inter alia including buyback taxes, securities transaction tax, goods and services tax, stamp duty and other incidental and related expenses.
Earlier in March 2021, GAIL has also completed a buyback of securities worth Rs1,406 crore consisting of about 6.97 crore shares at Rs150 per share.
GAIL is a leading player in gas marketing in India which sells about 52 per cent of natural gas and 44 per cent LNG sold in India. The Company supplies 67 per cent of gas consumed in the Fertilizer sector, 53 per cent in Power, and 60 per cent in CGD, in India. GAIL is in a confident position to cater to the needs of the customers and actively contribute towards the national goal of a ‘gas-based’ economy.
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