Bajaj Auto to buy back shares worth ~2.5K cr at ~4,600 each

Bajaj Auto has approved a buyback of shares worth up to ~2,500 crore. The two-wheeler major intends to buy back 5.43 million shares, aggregating up to 1.88 per cent of its paid-up share capital via the open market at ~4,600 per share.

In 2000, shareholders had approved a buyback of up to 18 million equity shares at a price of ~400 each.

Share purchases by companies and promoters are seen as a positive signal about the management’s confidence in the fundamentals of a business.

The promoter group holds around 54 per cent share in the company.

Bajaj said it will utilise at least 50 per cent of the amount earmarked — that is, ~1,250 crore. Based on the minimum buyback size and maximum buyback price, the company would purchase at least 27,17,392 (around 2.7 million) equity shares.

If the equity shares are bought back at a price below the maximum buyback price, the actual number of equity shares to be bought back could exceed the proposed buyback shares. However, it will always be subject to the maximum buyback size.

Earlier this month, the auto major’s board had deferred a decision on its proposed buyback. It later decided to meet on Monday, to further deliberate on the proposal for the buyback.

“The company, at its meeting held on Monday, has approved the proposal for buyback of the fully paid-up equity shares with a face value of ~10 from existing shareholders (except promoters, promoter group, and persons in control of the company). It would be from the open market through the stock exchange mechanism at a price not exceeding ~4,600 per equity share,” it said in a statement.

The board has constituted a committee and delegated the decision-making power on the buyback to it. Rajiv Bajaj, chief executive officer (CEO) of Bajaj Auto had said that the company has a policy of returning up to 90 per cent of the annual profit to shareholders.

The company has paid dividends to shareholders since FY08, with the amount going up each year — from ~20 per share in FY08 to ~140 at the end of FY22.