eClerx Services Rallies on Buyback Premium
eClerx announces buyback at 35% premium to Monday’s closing.
eClerx Services Ltd. announced that it will buy back 10,68,182 equity shares, or 2.62 percent of the total paid up equity share capital, at a maximum price of Rs 2,200 per share. The stock gained as much as 9.9 percent as the buyback price ceiling represents a premium of 35.5 percent to Monday’s closing price.
The buyback will cost eClerx Rs 235 crore, according to the company’s filing on the exchanges. Company will exhaust 39 percent of its existing cash balance, which is around Rs 598 crore. The company appointed Motilal Oswal Investment Advisors Private Ltd. to manage the buyback offer. The buyback is expected to be completed by third quarter of financial year 2016-17.
Buyback History
eClerx Services had a dividend pay-out ratio of 49 percent in financial year 2014-15, while in financial year 2015-16, the dividend pay-out ratio fell to 1.37 percent, according to data reviewed by BloombergQuint.
This is the second time in the past four years that the company is doing a buyback. In 2013, the company had proposed a buyback amounting to Rs 40.5 crore, but received offers worth only Rs 3.07 crore.
In current financial year, more than 15 companies have have either announced or completed buybacks amounting to more than Rs 24,000 crore. In each of the companies, the promoter held more than 50 percent stake and participated in the buyback, on a proportionate basis, under the tender offer route on the stock exchange. Promoters stake in eClerx pre-buyback is 50.25 percent.
Earnings Snapshot
eClerx’s revenue for the June quarter remained flat at Rs 340.32 crore on a sequential basis, while net profit fell 5 percent to Rs 95.15 crore compared to last quarter. Both revenue and profit marginally missed consensus estimate of analysts tracked by Bloomberg.
Earnings before interest, tax, depreciation and amortisation margins contracted by 400 basis points to 37 percent. Dollar revenue fell by 1.1 percent, while constant currency dropped 0.64 percent.
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