Buyback bids falter as stocks surge

CHENNAI: With stocks such as India Infoline, Zen Technologies, Supreme Petrochem, Apollo Tyres, Indiabulls Securities and HOV Services trading at a hefty 50-200% premium over their maximum buyback prices, their buyback managers have not purchased a single share from the open market in the last 70-100 days.
Marketmen said the buyback price is a strong indication to all shareholders that the company feels its shares are under-valued (i.e.cheap). Once a buyback is completed and the shares extinguished, existing shareholders gain a higher stake on paper without spending a penny. But with stock markets having risen over 85% since early March, buybacks have lost their sheen.
Out of the 26 buybacks currently 'on' at the BSE, 14 counters are trading at prices higher than the maximum price at which the buyback could be done, data for September 8 shows. India Infoline's lead manager, Axis Bank, started buying shares (for a maximum price of Rs 43.20) from December 18, 2008. But with the financial services firm's share trading between Rs 120 and Rs 150 for over 4 months, no share could be bought in this period, latest filings on the NSE show.
"We place buy orders on bourses to buy back shares as we are the appointed brokers but that price can't exceed the maximum price. However, the current price is market-determined and we can do little about it," says an Axis Bank official.
For Zen Technologies (up 150% from maximum buyback price) and Supreme Petrochem (up 90%) - the lead manager, Karvy, has not submitted any details of bought back shares since early April, details available with BSE show till September 7 show. Enam Securities has bought just 7,271 shares of Indiabulls Securities since the offer opened on May 14, but hasn't reported buyback of any share since June.
"Most of these buybacks are open market transactions. It is impossible to garner shares if stocks are ruling at a 50% premium to the maximum rate," a JM Financial official said.