eClerx Services will buy back shares at a premium of 16% via a public tender offer

The board of directors of eClerx Services Ltd. on Thursday approved the buyback of 13.75 lakh shares along with its fourth quarter results. This is the sixth time in the last eight years that the company has carried out a share buyback.

eClerx will spend no more than ₹385 crore for this buyback, which will constitute 24.98% of the total paid-up share capital and 18.38% of the free reserves. The company’s promoters intend to participate in the buyback process, the exchange filing said. The promoters of eClerx currently hold 53.61% stake in the company.

The buyback price has been set at ₹2,800 per share, a premium of 16.24% to Thursday’s closing price. The registration date for the share buyback will be determined later.

eClerx will carry out the buyback via the “tender offer” route, meaning the company will repurchase the shares from existing shareholders at a fixed price.

A company usually undertakes a share buyback to increase promoter stake, support the stock price and return excess cash to shareholders, increase earnings per share as the number of shares outstanding decreases and protect the company against any possible hostile takeover.

15% of the number of capital shares that the company proposes to repurchase or of the number of capital shares allocated according to the shareholding of small shareholders on the record date, whichever is greater, will be reserved for small shareholders .

Based on the March quarter shareholding pattern, eClerx has a total of 44,966 shareholders holding nominal share capital of up to ₹2 lakh and holding 32.79 lakh shares of the company.

In 2022, eClerx had announced a share buyback of ₹300 crore at a price of ₹1,750 per share. That same year, it issued one free share for every two shares held. Before the bonus, the company had bought back shares at a price of ₹2,850 apiece in 2021 as part of a ₹303-crore share buyback.

Shares of eClerx Services ended 4.7% higher on Thursday at ₹2,411. The stock has been an underperformer so far in 2024, down 5.6%, but has been a wealth creator over a one-year and five-year period. The stock is up nearly 80% over the past 12 months and has almost quadrupled in absolute terms over the past five years.