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Buybacks, open offers find many takers as returns disappoint

Even in the cases of buybacks, investors rushed to encash the offer made by the companies.

, ET Bureau|
Updated: Aug 20, 2019, 08.56 AM IST
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The open offer was priced Rs 980 per share against the prevailing market price of Rs 962.
Mumbai: Muted stock returns have made buybacks rather attractive now for investors, who had often given open offers and tender requests a miss when management change enhanced the likelihood of better governance and higher returns.

“There is a huge stress in the market because of the kind of fall we have seen in the past few months,” said G Chokkalingam, founder, Equinomics Research & Advisory. “We have not seen this kind of exit by the shareholders in companies where better management is coming in. Investors are desperate to exit in the mid and smallcap stocks by whatever modes available.”

The recently concluded Rs 1,142-crore open offer by Blackstone Capital to shareholders of Essel Propack was subscribed more than 125 per cent, according to the bankers. These open offers were never fully subscribed in the past, especially when an overseas company was taking over. Blackstone Capital bought shares at Rs 139.19 against the prevailing market price of Rs 130 during the offer period of July 29 and August 9. The stock declined more than 20 per cent after the closure of the open offer.

In NIIT Technologies, the open offer was subscribed 108 per cent despite Baring Private Equity Asia increasing the buyback size to 35 per cent from 26 per cent. The company had earlier acquired a 30 per cent stake in the technology firm for Rs 2,627 crore. Baring paid Rs 1,394 per share in the open offer against the average market price of Rs 1,337.

“Earlier, investors used to skip open offers or hold the stock on expectations of better performance with the new management,” said Ravi Sardana, EVP, ICICI Securities.

“However, in the current market conditions, investors are alert and they are deciding based on the difference between the offer price and prevailing market price.”

Larsen & Toubro’s open offer of about Rs 5,029.89 crore to acquire a 31 per cent stake in mid-cap IT major Mindtree was subscribed 116 per cent.

The open offer was priced Rs 980 per share against the prevailing market price of Rs 962.

Even in the cases of buybacks, investors rushed to encash the offer made by the companies.

Triveni Engineering’s buyback, which concluded on August 2, was subscribed by as much as 1,284 per cent as the stock price during the offer period July 22 and August 2 was about Rs 60 as against the offer price of Rs 100.

Similarly, Savita Oil Technologies’ buyback was subscribed by as much as 42 times, SH Kelkar buyback 10 times, and Geecee Ventures 22 times.

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