Novartis board okays buyback

Drugmaker Novartis said on Thursday its board of directors has unanimously approved a buyback proposal for the purchase of the company’s shares at ₹760 per share.

The company’s shares on the BSE closed on Thursday at ₹827, after the stock had leapt over 17 percent earlier this week on the board’s announcement of a proposed buyback.

Giving details of the proposal, the company said it is looking to buy back up to 3,820,000 equity shares of ₹5 each, representing 11.95 per cent of the total paid up equity capital from all its existing equity shareholders through the tender offer route.

Novartis would have to fork out ₹290 crore for this exercise.

The board in a statement noted the intention of the promoter to participate in the proposed buyback. Parent company Novartis AG holds 75 per cent in the Indian entity.

The purpose and timing behind the announcement were not explained by the company, leaving it open to assumptions of an eventual delisting plan from the Indian market.

Market analysts pointed out that shareholder response could be tepid because the offer price is less than that prevailing in the market.

Retail investor Ashish Choudhary said: “The current market price of the share is higher that what has been offered in the buyback. It seems unlikely that investors would tender their shares at the offered price.”

The buyback offer price represents a premium of 11.1 per cent over the volume weighted average price of the equity shares on BSE for three months preceding the date of intimation to the BSE on the board meeting to consider the proposal of buyback, and 5 per cent over the volume weighted average price of the equity shares on BSE for two weeks preceding the date of intimation to the BSE for the board meeting to consider the proposal of the buyback, the company said.

The buyback would be subject to the approval of shareholders by way of a special resolution through postal ballot and all other applicable statutory approvals, Novartis added.

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