GAIL (India) Limited has approved buyback of approximately 5.70 crore shares at an interest rate of Rs 190 crore per share for an amount of approximately Rs 1,083 crore (excluding taxes). The buyback price of the equity shares is at 24 per cent premium as on March 30, 2022, which is the closing price on NSE. The Board of Directors of the Company in its meeting held this week took a decision to consider buyback of fully paid-up equity shares of the Company. The Board approved buyback of about 5.70 crore shares through a tender offer representing 2.50 per cent of its paid-up capital and free reserves till March 31, 2021.
GAIL: Expected Return
GAIL share buyback is attractive at Rs 190 per share based on CMP. The buyback will reduce the total number of outstanding shares by 1.5 per cent and marginally boost future EPS. The stock is currently trading at 6.1x EV/EBITDA 1Yr Fwd, which is lower than the 5-year average of 7.1x due to headwinds in the sector. According to our analysis, the buyback can provide returns of 10 per cent to 20 per cent depending on the CMP and an acceptance ratio of 50 per cent to 100 per cent, said Setumadhavan KS, Analyst, Geojit Financial Services.
GAIL’s board of directors “approved buyback of approximately 5.70 crore shares at the rate of Rs 190 per share for an amount of approximately Rs 1,083 crore (excluding taxes),” the company said in a statement. The buyback price of equity shares is at a 24 per cent premium over Wednesday’s closing price on the NSE. GAIL had spent Rs 1,046.35 crore on similar share buybacks in 2020-21.
Gail: What is a buyback?
Share buyback, also known as 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 of returning money to shareholders. Share buybacks reduce the number of shares in circulation, which can increase the share price and earnings per share (EPS).
Gayle: Record Date
The Company has fixed Friday, April 22, 2022, as the record date for the purpose of ensuring the eligibility of shareholders for buyback of equity shares. The buyback will be offered on a proportionate basis through the tender offer route as per SEBI Regulations, 2018.
GAIL: Offer Size
The buyback size represents 2.50 per cent of the fully paid-up equity share capital and 2.22 per cent of free reserves as per the company’s audited standalone and consolidated FY 2011 financial statements.
The buyback offer size, GAIL said, does not include any expenses incurred for the buyback or fees payable to the Securities and Exchange Board of India, advisory fees, public announcement publication expenses, printing, remittance expenses, applicable taxes. This includes buyback tax, securities transaction tax, goods and services tax, stamp duty and other incidental and related expenses.
Earlier in March 2021, GAIL has also completed buyback of securities worth Rs 1,406 crore, which includes about 6.97 crore shares at Rs 150 per share.
GAIL is a leading player in gas marketing in India, selling about 52 per cent of natural gas and 44 per cent of LNG in India. The company supplies 67 percent of the gas consumed in the fertilizer sector, 53 percent of the electricity and 60 percent of the CGD in India. GAIL is in a confident position to meet the needs of the customers and actively contribute towards the national goal of ‘Gas based’ economy.
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