Mumbai, Nov. 26: Cairn India will buy back shares worth Rs 5,725 crore at a price not exceeding Rs 335 apiece.
The company plans to purchase the shares from the open market.
The ceiling price represents a premium of nearly 3.39 per cent over the closing price of Cairn India shares on the stock exchanges today.
On the Bombay Stock Exchange, the scrip today ended at Rs 324, down 2.09 per cent from the previous close of Rs 330.90.
Market circles have been keenly watching Cairn India’s buyback offer as it was felt that Cairn Energy Plc, which holds a 10.27 per cent stake (19.62 crore shares), will use the opportunity to exit the company.
The buyback will start in January.
The Vedanta group company said in a press statement that the indicative maximum number of shares that could be bought back would be over 17.08 crore, resulting in the reduction of equity capital by around 8.9 per cent.
The company said the buyback came on the backdrop of strong cash flows generated through its lucrative asset base.
At present, the company produces over 213,000 barrels of oil equivalent per day (boepd) and is on track to meet the year-end target of over 225,000boepd.
According to Cairn India, the buyback proposal is a mechanism to reward shareholders because it would bring down the equity share capital and lead to an increase in the earnings per share. It will also help the company maintain the current dividend payout ratio.
“The company continues to work on its $3-billion capex programme over the next three years till 2015-16 and is well-placed to develop its current asset base and monetise the existing exploration opportunities with the objective of strengthening its E&P (exploration and production) portfolio.” chief financial officer Sudhir Mathur said.
Capital market circles were, however, disappointed by the ceiling price of Rs 335 per share and said the scrip might face selling pressure tomorrow.