Buyback Price of Rs 261 Best Offer in Current Set-Up: JSPL

From MoneyControl | Business |
Ravi Uppal, MD & CEO, Jindal Steel and Power (JSPL), says since the aggregate buyback amount would not exceed Rs 1000 crore they would be able to fund it through cash in their balance sheet.

The board of directors of the company approved the buy back of equity shares from its existing shareholders (other than promoters, promoter group, persons in control and persons acting in concert), at a price not exceeding Rs 261 per equity share, up to an aggregate amount not exceeding Rs 1,000 crore from the open market.

Uppal believes in today’s conditions the buyback price of Rs 261 is the best value offered.

Moreover, he said, "In every quarter we generate around Rs 1000 crore of cash. If you look at the profit after tax (PAT) of the company plus the depreciation amount that we recover, it comes to about Rs 1000 crore plus. So, we are not worried as to how we will fund the working capital of the company."

Below is the verbatim transcript of his interview on CNBC-TV18

Q: The buyback is at a premium of only around 15-20 percent. Do you think your investors are going to be satisfied with this kind of a price?

A: We have taken the decision of the buyback price keeping in mind several things that is the price of the share in the last two weeks, last three months and also the prevailing price as we have today. The price has been fluctuating but we believe that the price that we have offered is about 10 percent more than the prevailing price. This we believe is a very good and reasonable offer.

Q: What does the cash in your books stand at because last time we checked it was roughly around Rs 300 crore odd. So, how are you going to fund this buyback?

A: We have cash on the balance sheet which is a little more than Rs 1000 crore  by way of marketable securities and deposits. So, I am not worried about the cash part of it, we have adequately provided for it. The size of the total thing is about Rs 1000 crore and we think we should be able to arrange this cash out of our present balance sheet.

Q: Are you all looking to deploy the entire Rs 1000 crore in the buyback because you will have lot of working capital requirements. You would also have certain capex for which you will need cash. So, of this Rs 1000 crore roughly how much could be utilized for the buyback?

A: A whole lot of it. In every quarter we generate something like Rs 1000 crore of cash. If you look at the profit after tax (PAT) of the company plus the depreciation amount that we recover, it comes to about Rs 1000 crore plus. So, we are not worried as to how we will fund the working capital of the company.

Q: What kind of acceptance ratio do you think we are going to get, what kind of response we are going to get to this buyback. Rs 1000 crore it doesn’t amount to even 5 percent?

A: Rs 1000 crore is about 5 percent. However, I think the response is going to be very encouraging. The basic purpose of coming with this buyback was to inspire confidence in the mind of our investors as to what should be the value of the share.

Some weeks ago the share price was declining for reasons that we couldn't understand. So, at that point of time we took a decision that we will do a buyback and we fixed up a price that we believe is real value of the share at this point of time. Therefore we have stuck to our decision.

The board of directors today sort of took the decision to offer it at Rs 261.

Q: Any conversation that you have had with a couple of your investors, who would be interested in tendering into the buyback?

A: We are in constant touch with all our major investors. We have been talking to our bankers. Many institutions have been consulted and the route that we have taken it is the best route which has been agreed by all the major stake holders.

Q: The buyback price is at Rs 261, and you believe it is the fair value of the stock. The same stock was trading at around Rs 400 around 9-10 months ago. So, do you believe that Rs 261 is a fair value of the stock given that you would be the best analyst of your own company?

A: These things can always be debated but we have to consider the circumstances under which the offering is being made. As the economy perks up, as the business climate improves, I am absolutely certain that the price is going to go beyond that.

However in today's condition when the buyback is being offered, we think Rs 261 is the best value that we can offer.



TAGS: BUYBACK, PRICE, CRORE, CASH, COMPANY

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