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MUMBAI: Kalanithi Maran-controlled South Indian broadcast major Sun TV Network is considering buying back its equity shares from its shareholders, a move that has surprised analysts as the promoter holding is already 75 per cent.
The move also implies that Sun TV Network does not have expansion plans for which it would require huge capital. Buyback of equity shares is one of the modes of capital restructuring, which helps in increasing the company’s earnings per share (EPS), averts hostile takeovers, improves returns to the stakeholders, and realigns the capital structure as the company extinguishes the bought shares, thus reducing its total number of shares.
Sun TV has around Rs 750 crore (Rs 7.50 billion) cash as on 30 September, which it could use to buy back shares from the shareholders.
The final call on the buyback proposal will be taken on 5 November.
Sun TV informed the BSE on Friday that a meeting of the board of directors will be held on 5 November to “consider and if thought fit” to “approve a proposal to buy-back the fully paid-up equity shares of the company”.
After the announcement, Sun TV scrip shot up to an intraday high of Rs 411.30 before closing at Rs 395.70 per share, up 5.21 per cent, from its previous close on the BSE.
When a company has surplus funds for which it does not have good avenues for deployment assuring an average return on capital employed and earnings per share, the company’s financial structure requires balancing.
The buyback does not only improve EPS but also return on capital and return on net worth, and enhances long-term shareholder value. It further provides an additional exit route to shareholders when shares are undervalued or are thinly traded.
However, such buy-back also results in an increase in the promoter shareholding. In case of Sun TV Network, that could be a hurdle as the promoters already own 75 per cent, the maximum permissible limit as per the market regulator Securities & Exchange Board of India (SEBI).
This means that Sun TV promoters will have to tender their shares in buy-back, which it cannot do if the buy-back is through stock exchanges.
As per Rule 15 of the SEBI (Buyback of Securities) Regulations, in case of buy-back through a stock exchange, promoters cannot offer their shares for buy-back.
However, the buy-back can also be done through the book-building process and the regulation states that the company will have to disclose in case the promoters and persons in control of the company wish to tender shares for buy-back.
www.televisionpost.com/television/sun-tv-mulls-buyback-of-shares-scrip-shoots-up-5-2/
The move also implies that Sun TV Network does not have expansion plans for which it would require huge capital. Buyback of equity shares is one of the modes of capital restructuring, which helps in increasing the company’s earnings per share (EPS), averts hostile takeovers, improves returns to the stakeholders, and realigns the capital structure as the company extinguishes the bought shares, thus reducing its total number of shares.
Sun TV has around Rs 750 crore (Rs 7.50 billion) cash as on 30 September, which it could use to buy back shares from the shareholders.
The final call on the buyback proposal will be taken on 5 November.
Sun TV informed the BSE on Friday that a meeting of the board of directors will be held on 5 November to “consider and if thought fit” to “approve a proposal to buy-back the fully paid-up equity shares of the company”.
After the announcement, Sun TV scrip shot up to an intraday high of Rs 411.30 before closing at Rs 395.70 per share, up 5.21 per cent, from its previous close on the BSE.
When a company has surplus funds for which it does not have good avenues for deployment assuring an average return on capital employed and earnings per share, the company’s financial structure requires balancing.
The buyback does not only improve EPS but also return on capital and return on net worth, and enhances long-term shareholder value. It further provides an additional exit route to shareholders when shares are undervalued or are thinly traded.
However, such buy-back also results in an increase in the promoter shareholding. In case of Sun TV Network, that could be a hurdle as the promoters already own 75 per cent, the maximum permissible limit as per the market regulator Securities & Exchange Board of India (SEBI).
This means that Sun TV promoters will have to tender their shares in buy-back, which it cannot do if the buy-back is through stock exchanges.
As per Rule 15 of the SEBI (Buyback of Securities) Regulations, in case of buy-back through a stock exchange, promoters cannot offer their shares for buy-back.
However, the buy-back can also be done through the book-building process and the regulation states that the company will have to disclose in case the promoters and persons in control of the company wish to tender shares for buy-back.
www.televisionpost.com/television/sun-tv-mulls-buyback-of-shares-scrip-shoots-up-5-2/
