Aarti Drugs Buyback: All You Need To Know

The company announced a buyback of 6,65,000 equity shares or 0.72% of its paid-up share capital, on July 21.

<div class="paragraphs"><p>The record date for the proposed buyback is Aug. 4. (Source: Unsplash)</p></div>
The record date for the proposed buyback is Aug. 4. (Source: Unsplash)

Aarti Drugs Ltd. has announced a buyback allowing all shareholders, including its promoters, an equal opportunity to tender their shares at a premium of more than 76% to its Friday closing price.

The company said it would buy back 6,65,000 equity shares, or 0.72%, of its paid-up share capital, on July 21. The record date for the proposed buyback is Aug. 4, according to an exchange filing.

Shares of Aarti Drugs hit a fresh 52-week high on Monday, following the announcement of the buyback and its first quarter results. Share prices surged over 19% to Rs 609 apiece, which is still lower than the offered buyback price.

Key Highlights

  • The company has approved the buyback of 6.65 lakh fully paid-up equity shares, representing 0.72% of its existing capital.

  • The price for the buyback is set at Rs 900 per share, aggregating up to Rs 59.85 crore.

  • This is 5.1% of the fully paid-up equity share capital and free reserves, according to the consolidated balance sheet.

  • The promoter and promoter group are participating in the proposed buyback.

  • The buyback is to take place on a proportionate basis through a tender offer, according to prescribed buyback regulations.

  • The option to apply for a buyback would extend to all equity shareholders/beneficiary owners who hold shares on the record date, which is Aug. 4.

  • The current promoter holding is 58.7%.

  • Public shareholding is 41.3%.

Derivation Of Buyback Price

The buyback amount of around Rs 60 crore was derived considering 25% of the cumulative after-tax profits of last five years, adjusted for shareholder payouts, said Adish Patil, chief financial officer at Aarti Drugs.

Considering taxes on the buyback, the additional Rs 10 crore will be funded from current year profit, he said.

With regards to the premium offered on the buyback, he said that in March 2021 as well, they had done a buyback at Rs 1,000 per share, when the share price was Rs 686 apiece.

"As a company, we did not want to reduce the buyback premium that we paid in the past. Also, we have come a long way since, with regards to the capex incurred in the past two years, which is expected to commercialise by H2 FY24. We would want all shareholders to participate and benefit from the buyback."

The company is expecting that current shareholding will not change after the buyback, since it is on a proportionate basis, he said.

It had a cash and bank balance of around Rs 9 crore and other financial assets of Rs 12 crore, as on March 31. It had other current assets to the tune of Rs 90 crore.