Shares of HCL Technologies Ltd. rose as much as 4 percent today after brokerages said they expect the proposed buyback to come at a premium to the current stock price, similar to its buyback last year.
“HCL’s cash and equivalents have reduced from Rs 12,700 crore as the company spent more on acquisitions and partnerships. Hence, we anticipate a buyback in the range of the previous one of Rs 3,500 crore,” said a Motilal Oswal note, adding, this may come at Rs 1,100 per scrip. IDBI Capital expects the same buyback price, amounting to a premium of 14 percent compared to a 17 percent premium last year.
Mayuresh Joshi of Angel Broking agreed. “The premium should be reasonably higher than the current market price which should entice current shareholders to stick around with the stock,” he told BloombergQuint in an interview.
HCL Technologies' board is scheduled to meet on July 12 to consider a proposal for a buyback. Last year, the information technology company had offered a Rs 3,500 crore buyback, with a 17 percent premium on the then prevailing stock price. The proposal has come days after India's largest IT company Tata Consultancy Services Ltd. declared a Rs 16,000-crore share buyback programme. It has offered to buyback shares at a premium of over 15 percent at Rs 2,100 apiece.
Cash and cash equivalents of HCL Technologies stood at Rs 6,375 crore as of March 31, 2018, according to the exchanges. The company will need shareholders’ approval if the buyback amount exceeds 10 percent of its total net worth, i.e., Rs 6,375 crore. At the same time, the buyback amount can not exceed Rs 9,097 crore, which accounts for 25 percent of its total net worth, as per Securities and Exchange Board of India rules.
The HCL Technologies stock has risen 10.7 percent to Rs 980 in 2018 so far, compared to a 7 percent rise in the benchmark S&P BSE Sensex Index.