Disinvestment: HPCL announces share buyback of Rs 2,500 crore at Rs 250 per share

• HPCL said that the board has approved the proposal to buyback 10 crore shares, which represents 6.56 percent equity share

• The buyback price is at a premium of nearly 34 percent

New Delhi: The Board of Directors at state-run oil refiner Hindustan Petroleum Corporation Ltd (HPCL) has given its approval to share buyback worth Rs 2,500 crore. In a regulatory filing to the stock exchanges on Wednesday, HPCL said that the board has approved the proposal to buyback 10 crore shares, which represents 6.56 percent equity share, at Rs 250 per share. The buyback price is at a premium of nearly 34 percent. HPCL scrip closed at Rs 187.20 on NSE on Wednesday.

"… the Board has considered and approved the… the proposal for buyback of the Company's Equity Shares, for an aggregate amount not exceeding Rs 2,500 Crore… and at a price not exceeding Rs 250 per Equity Share…," said HPCL in the filing.

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"The indicative maximum number of Equity Shares proposed to be bought back at the Maximum Buyback Size and Maximum Buyback Price under the Buyback would be 10,00,00,000 (Ten Crore Only) Equity Shares ("Maximum Buyback Shares") (representing 6.56% which is less than 25% of the total number of Equity Shares in the existing paid up equity capital of the Company)," HPCL said.

The backdrop

The news comes shortly after NTPC and KIOCL announced a share buyback on November 2 and October 21, respectively. While NTPC's share buyback is worth Rs 2,275 crore, KIOCL is valued at Rs 155.92 crore.

The government is believed to have reached out to a number of PSUs like Coal India Ltd, NTPC Ltd, NMDC Ltd, MOIL Ltd, and Engineers India Ltd (EIL) for share buybacks this year. The government is the largest shareholder in all these companies and is looking to sell off its equity for cash in return. The Department of Investment and Public Asset Management (DIPAM) has managed to raise just about 3 percent of its FY21 target of Rs 2.1 lakh crore so far. With tax revenues hitting a new low in the wake of the COVID-19 pandemic, the fiscal gap is likely to rise to more than double the target of 3.5 percent of the Gross Domestic Product (GDP). DIPAM Secretary Tuhin Kanta Pandey had said in an interview recently that the Centre is encouraging PSUs to announce share buybacks if they have extra cash available after meeting their capex requirements.

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