State-owned Oil India Ltd will buyback 5.04 crore of its shares for a little over Rs 1,085 crore as part of the government’s push to cash-rich PSUs to part with their surplus either by paying higher dividends or through share buybacks so as to help meet revenue targets.
In a regulatory filing, OIL said its board has approved buyback of shares at an aggregate of no more than 10 per cent of the fully paid-up equity share capital and free reserves of the company.
The board approved “the buyback by the company of its fully paid-up equity shares of Rs 10 each not exceeding 5.05 crore equity shares (representing about 4.45 per cent of the total number of equity shares in the paid-up share capital of the company) at a price of Rs 215 per equity share payable in cash for an aggregate consideration not exceeding Rs 1085.72 crore,” it said.
The nation’s second large oil explorer had a little less than Rs 20,000 crore of reserves.
Rationale for buyback
Explaining the rationale for the buyback, OIL said a share buyback is an acquisition by a company of its own shares with the objective to return surplus cash to its shareholders.
The buyback through the tender offer process gives an option to all the shareholders, including promoters, to receive the surplus cash by participating in the buyback, in the proportion of their shareholding.
The Board of Directors, it said, was of the view that the proposed buyback will help the company to achieve the long-term benefit of optimising the capital structure and improving key financial ratios.
SBI Capital Markets Ltd is the lead manager of the issue while Cyril Amarchand Mangaldas is the legal advisor for the offer.
OIL shares closed at Rs 218.78 on the BSE on Thursday. Friday was a trading holiday on account of Gurunanak Jayanti.