- Wealth PMS
Sun Pharmaceutical Industries announced that, the Board of Directors of the Company at its meeting held on June 23, 2016 approved the buyback of its fully paid up equity shares. (Press Release here)
The buyback is being undertaken by the Company to return surplus funds to the equity shareholders and thereby, enhancing the overall returns to shareholders.
But, as only Capital Mind will tell you, this is just a tiny number only to give a tax-free dividend to promoters and long term shareholders.
Maximum number of fully paid up equity shares to be bought back – 7.5 million equity shares. Out of a share capital base of 2.4 billion (240 cr. shares) they will buy back just 0.3% of the share capital.
Buyback price per share – Rs. 900 for each fully paid equity share payable in cash (stock has closed at Rs. 751.90/- on 23-Jun)
Buyback Mechanism – Proportionate basis through a Tender Offer.
15% of the buyback offer is reserved for shareholders holding equity shares having market value of not more than Rs. 2,00,000 as on the record date. (As of 31-Mar-16, Individual share capital upto Rs. 2 Lacs stood at 416,627 shareholders holding 125,574,216 shares representing 5.22% of the share capital).
This means that only 1,125,000 shares (15% of 7,500,000 reserved) would be bought back from Individual Investors who currently hold shares below Rs. 2 lakhs (just 0.05% of their current holding). There is no real arbitrage like it was in Bharti Infratel.
Eligibility for participation in buyback – Shareholders who hold equity shares as on the record date.
Record date for buyback – July 15, 2016
Should You Buy In Droves?
Well, no. The buyback is for 0.3% only. This is just a better way to pay dividend to longer term and rich long term areholders. No dividend tax of 20% needs to be paid, and holders will pay no tax on the sale due to zero long-term capital gains taxes. More and more companies will use this route this year.
If you hold shares you could choose to tender them, or let it be. Doesn’t really matter, though you should tender them all to collect whatever dividend you can!
Disclosure: We have recommended Sun Pharma in Premium portfolios. (Get Capital Mind Premium Now!)
Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.
Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.