Expected return, record date, other details investors need to know

GAIL (India) Limited has approved a buyback of approximately 5.70 crore shares at Rs190 per share totaling approximately Rs1,083 crore (excluding tax). The share repurchase price is at a 24% premium to the March 30, 2022 closing price at NSE. The decision was taken by the Company’s Board of Directors at its meeting held this week to consider the redemption of the Company’s fully paid shares. The Board of Directors has approved the repurchase of approximately 5.70 crores of shares through a tender offer representing 2.50% of its paid-in capital and free reserves as of March 31, 2021.

GAIL: expected returns

“The buyback of GAIL shares at Rs190 per share is attractive on a CMP basis. The buyback will result in a 1.5% reduction in the total number of shares outstanding and will result in a slight increase in future EPS. The stock is currently trading at 6.1x EV/EBITDA 1Yr Fwd, which is below its 5-year average of 7.1x due to headwinds in the sector. According to our analysis, redemption can provide a return of 10% to 20% based on a CMP and an acceptance rate of 50% to 100%, for short-term investors,” said Sethumadhavan KS , analyst at Geojit Financial Services.

GAIL’s board of directors has approved the “repurchase of approximately 5.70 crore shares at the rate of Rs 190 per share totaling approximately Rs 1,083 crore (excluding tax),” the company said in a statement. The share repurchase price is at a 24% premium to Wednesday’s closing price at NSE. GAIL had in 2020-21 spent Rs 1,046.35 crore on a similar share buyback.

GAIL: What is a buyout?

A stock buyback, also known as a stock repurchase, is a corporate action to repurchase its own outstanding shares from its existing shareholders, usually at a premium to the prevailing market price. This can be another tax-efficient way to return cash to shareholders. Share buybacks reduce the number of shares outstanding, which can increase share value and earnings per share (EPS).

GAIL: Date of registration

The company has set Friday, April 22, 2022 as the record date for the purpose of verifying the eligibility of shareholders for the share buyback. The takeover will be offered on a proportionate basis through a public tender offer in accordance with the Sebi regulations of 2018.

GAIL: Bid Size

The size of the buyout represents 2.50% of total fully paid up share capital and 2.22% of free reserves according to the Company’s FY21 standalone audited consolidated financial statements.

The size of the takeover offer, GAIL said, does not include expenses incurred or to be incurred in the takeover, such as filing fees payable to the Securities and Exchange Board of India, advisers’ fees, publication of public announcements, printing, shipping costs, applicable taxes inter alia redemption tax, securities transaction tax, goods and services tax, stamp duty and other incidental expenses and related.

Earlier in March 2021, GAIL also completed a share buyback worth Rs 1,406 crore consisting of approximately 6.97 crore shares at Rs 150 per share.

GAIL is a major gas marketing player in India, marketing around 52% of the natural gas and 44% of the LNG sold in India. The Company supplies 67% of the gas consumed in the fertilizer sector, 53% in the electricity sector and 60% in CGD, in India. GAIL is in a position of confidence to meet customer needs and actively contribute to the national goal of a “gas-based” economy.

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