The board of directors of Hindustan Unilever on Sunday approved a buyback plan at Rs 230 a share, aggregating a total of Rs 630 crore. It will be placed before company shareholders through a postal ballot notice. The board will also seek shareholder approval to buy back up to 25 per cent of the company’s shares.
The budget of Rs 630 crore can accommodate a little more than 27 million shares. With the more than 2.2 billion shares making up its paid-up equity and a market capitalisation of Rs 43,000 crore, the first round of buyback is aiming to pick up a little more than 1 per cent of the shares.
The company’s shares closed on Bombay Stock Exchange on Friday at Rs 196.45. Its 52-week high was Rs 262.50 in September 2006. The company statement said it would acquire these shares through open market purchases on the Bombay Stock Exchange and National Stock Exchange “from time to time”.
“The maximum price is at a premium of 17 per cent over the closing price of the company’s share on July 27, 2007. The average closing price of the Hindustan Unilever share on the Bombay Stock Exchange over the last six months is Rs 196. The buyback is proposed to effectively utilise the surplus cash and make the balance sheet leaner and more efficient to improve returns,” the company said.
Hindustan Unilever has around 410,000 shareholders in India. The promoters, Unilever Plc, hold 51.42 per cent in the company. Foreign institutional investors hold another 12 per cent and resident individual shareholders hold more than 17 per cent.
Life Insurance Corporation of India is the largest Indian institutional shareholder in the company with a 7.47 per cent stake and the general insurance companies New India Assurance and National Insurance Company hold 1.06 per cent and 1.52 per cent, respectively. Consequently, the government indirectly owns around 10 per cent of the company’s shares.