The boards of National Mineral Development Corporation (NMDC) and Manganese Ore India (MOIL) have, in separate meetings, approved buyback of about 20 per cent of the companies’ shares listed on the exchanges. While NMDC has offered to buy back the shares at ₹94 a share, MOIL said it will pay ₹248 a share.
At a meeting held on Tuesday and intimated to the exchanges on Wednesday, iron ore mining major NMDC said that the board has approved the buyback of fully paid-up equity shares of ₹1 each not exceeding 80.08 crore in number, representing 20.20 per cent of the paid-up share capital of the company.
This is less than the 25 per cent cap of the total number of equity shares in the paid-up share capital of the company (99.11 crore equity shares) at a price of ₹94 a share of face value ₹1 each payable in cash for an aggregate consideration not exceeding ₹7,527.76 crore.
According to the audited accounts of the company for the financial year ended March 31, 2016, this is below the 25 per cent of the aggregate of the fully paid-up share capital and free reserves.
Similarly, the MOIL board, in Nagpur on Tuesday, approved a proposal to buy back fully paid-up equity shares of ₹10 each not exceeding 3.48 crore shares, representing 20.72 per cent of the company’s equity base. This pegs the buyback offer size at ₹863.34 crore.
The company has appointed IDBI Capital Market Service as the lead manager to the offer.
Tender offer route These buybacks will be by done via the tender offer route as prescribed under the buyback regulations
The respective boards of directors noted the intention of the promoter of the company to participate in the proposed buyback and constituted a buyback committee and delegated its powers to do all such acts in pursuance of the same.
The promoter group, including various financial institutions, holds about 80 per cent of the equity in these companies and the rest rests with the public. The move to buy back comes in the backdrop of the government calling upon cash-rich public sector undertakings to emulate their private sector peers and buy back shares and consolidate their balance sheets.
On Wednesday, NMDC shares closed at ₹90.40, down 1.36 per cent, on the BSE, while MOIL shares edged down 1.44 per cent at ₹239.60.
Divestment target These buyback programmes worth about ₹8,390 crore will help the government meet its divestment target. As the offer is on proportionate basis, about 80 per cent of the amount will go to the government kitty. The Centre aims to raise ₹56,000 crore in the current financial year through disinvestment.
While it aims to raise ₹36,000 crore come from minority stake sales in PSUs, the remaining ₹20,500 crore is expected to be raised from strategic sales in both profitable and loss-making companies.