GAIL (India) Ltd, on Thursday, announced a buyback of 5.7 crore shares at Rs. 190 apiece, amounting to Rs 1,083 crore, excluding taxes.
On the announcement, the stock of GAIL inched up 1.63% and closed at Rs 155.95 on NSE.
The company came up with a similar repurchase program the last fiscal in March 2021, where it bought back its 6.97 crore equity shares at Rs 1046 crore@ Rs. 150 per share.
The board of directors of GAIL gave its nod to “buyback of about 5.70 crore shares at the rate of Rs 190 per share aggregating to about Rs 1,083 crores (excluding taxes),” the company said in a statement.
The buyback price of equity shares is almost 24% premium over Wednesday’s close price of Rs 153.45 at NSE.
Stock buyback options are a tax-effective manner of rewarding shareholders. The government controls 51.80% of the natural gas corporation and will very certainly participate in the repurchase.
The government accumulated Rs 747 crore in the 2020-21 buyback.
What Is Share Buyback?
The share buyback, or share repurchase, is a process whereby a company repurchases its own shares from investors or stakeholders, usually at a premium rate. It is typically viewed as an alternative and tax-efficient way to return money to shareholders. Buybacks are captivating in tax terms despite attracting a 10 per cent tax on long-term capital gains (LTCG).
“The Board approved buyback of about 5.70 crore shares through tender offer representing 2.50 per cent of its paid-up capital and free reserves as of March 31, 2021,” GAIL said in the statement.
GAIL has a good track record of consistently guerdoning its shareholders via regular dividends, issue of bonus shares, and also buyback of shares at a premium.
During fiscal 2021-22, the company paid the interim dividend twice.
In FY 2008-09, 2016-17, 2017-18, and 2019-20, the gas corporation GAIL had issued bonus shares.