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Our Bureau

Kolkata, Aug. 20

Wednesday was the first trading session after HEG Ltd announced its market buyback price limit of Rs 350. The stock made an attempt to move up after opening higher, but could not sustain the gains.

Opening with a substantial gap at Rs 277 against the previous close of Rs 264.65, the stock peaked the session at Rs 285, but finished the day at Rs 271. The volume more than doubled on the BSE from its fortnightly average. On the NSE, around 53 per cent of the day’s total traded quantity, of around 5 lakh shares, was delivery-based.

According to Mr Arun Kejriwal of KRIS, a buy-back programme through market purchases does not generally benefit the non-promoter shareholders, but helps steadying the price somewhat.

On Tuesday, after market hours, HEG informed stock exchanges that the board of directors has earmarked Rs 48.5 crore for the buy-back. HEG’s total outstanding shares available in the public domain is little over 2.15 crore.

At Tuesday closing price, the total buy-back could have mopped up 4.1 per cent of the outstanding equity and, at the maximum price of Rs 350, the total buyback could stand at 3.1 per cent.

According to Mr Chirag Khasgiwala of Emkay: “Given the fact that 49 per cent of the stock is held by non-promoters, the buy-back could be to the tune of 8.5 per cent of the floating stock at Rs 265 and 6.4 per cent at the maximum purchase price (Rs 350).”

The buyback would lead to an EPS accretion of 2.3 per cent to 3.1 per cent depending upon the average of the prices at which the actual buyback happens, the analyst added.

The stock’s 52-week low is Rs 174. Its six-month average is Rs 275 and the 52-week high is Rs 608.

According to Mr Ajay Jaiswal of Microsec, the market purchases are unlikely to reflect demand and supply-based price discovery, as the company has not mentioned the duration of the buy-back operation.

According to market sources, the buy-back is aimed at increasing the promoter holding, which has come down by 1.70 per cent to 49.74 per cent after Mehtas, till recently part of the promoter group, stepped aside to be part of the non-promoters.

According to an Emkay note: “Given the fact that the management has subscribed to 4.73 million warrants at Rs 365/warrant each convertible into one share and has announced a buyback up Rs 350/share, we reiterate our ‘buy’ recommendation on the stock with a target price of Rs 434, which is an aggregate of (a) 8xfy10 FDEPS of Rs 48.8 and (b) Rs 44 as value of stake of HEG in group company Bhilwara Energy (on a conservative basis).”

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