HPCL Buyback Plan: Hindustan Petroleum Corporation Limited (HPCL) shareholders have a good chance of earning. HPCL has decided to buy back 100 million shares from investors under the buyback program. The company’s board has approved the decision to buy back the shares at a rate of Rs 250 per share. Right now the share price is Rs 187. In this context, the shareholders can get 63 or 34 per cent return on every share. HPCL informed share buyback during the release of second quarter results.
2500 million Buyback
The company has decided to buy back the share at a premium of 34 per cent according to the current price. HPCL will buy 10 crore shares from shareholders at a price of Rs 250. This means that the company will buyback shares worth Rs 2500 crore. It is 6.56 per cent of the total equity share of the company. At present, this decision of the company has created a good earning opportunity for its investors.
Profit doubles in September quarter
HPCL’s profit in the second quarter of FY 2021 is Rs 2477 crore. This is double compared to the same period last year. HPCL had a profit of Rs 1052 crore in the September quarter last year. The company’s total income in the September quarter was Rs 62,419 crore, compared to Rs 66,854 crore in the September quarter last year. This year HPCL has raised Rs 2,000 crore through bonds.
What is share buyback?
When a company buys its own shares from investors, it is called a buyback. You can also consider it the reverse of an IPO. These shares cease to exist after the buyback process is completed. For buyback mainly two methods – tender offer or open market are used.
Why do companies buyback
The biggest reason for this is the excess cash in the company’s balance sheet. It is not considered good to have too much cash with the company. It is believed that the company is not able to use its cash. The company uses its excess cash through share buybacks. Many times the company feels that its share price is low (undervalued), then it tries to increase it through buyback.
What is the process
First, the company’s board approves the proposal for share buyback. After this, the company announces the program for buyback. It mentions record date and buyback period. Record debt means that the investors who hold shares of the company till that day will be able to participate in the buyback.
Buyback effect on share
Buybacks affect the company and its stock in many ways. The number of shares of a company present for trading in the stock market decreases. This increases earnings per share (EPS). The PE of the stock also increases. This does not change the business of the company.