Dr Reddy’s plan to buy back equity shares gets green signal

Dr Reddy’s Laboratories Board has approved the proposal for buyback of its equity shares.

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Hyderabad: The Board of Directors of the Dr Reddy’s in their meeting held on February 17, 2016 approved a proposal to buyback equity shares of the company, subject to approval by the shareholders, for an aggregate amount not exceeding Rs 15,694 million and (being 14.9% of the total paid-up equity capital and free reserves of the company as on March 31, 2015, at a price not exceeding Rs. 3,500 per Equity Share from all shareholders of the company. These include the persons who become shareholders by cancelling American depository shares and receiving underlying equity shares, but excluding the promoters and promoter group of the company.

Meanwhile, the company has also appointed Kotak Mahindra Capital Company Limited as its merchant banker for the buyback process. It is expected to provide relevant updates in relation to the buyback in due course.

As per the statement from the company, in accordance with the provisions of Regulation 15(b) of the Buy-Back Regulations, the Buyback shall not be made from the promoters and promoter group of the Company. The Maximum Buyback price represents 18.6% premium, compared to the average of the weekly high and low of the closing share price of the Company during the last two weeks (i.e. up to February 16, 2016).

“Buyback is proposed on account of the company’s strong cash flow position and is expected to be EPS accretive contributing to an overall enhancement of value for shareholders going forward. The proposed Buyback is subject to approval of the shareholders of the Company, by way of a special resolution through postal ballot (including e-voting) and other regulatory approvals, permissions and sanctions, as may be required. Once approved, the public announcement setting out the process, timelines and other statutory details will be released in due course in accordance with the Buyback Regulations,” it mentioned.

At the maximum buyback price and for the maximum buyback size, the indicative maximum number of equity shares bought back would be 4,484,049 (comprising around 2.6% of the existing paid-up capital). If the equity shares are brought back at a price below the maximum buyback price, the actual number of equity shares bought back could exceed the indicative Maximum Buyback Shares, but will always be subject to the Maximum Buyback Size. The Company shall utilize atleast 50% (fifty percent.) of the amount earmarked as the maximum Buyback Size for the Buyback Offer i.e Rs. 7,847 million (comprising around 7.45% of the existing total paid-up equity capital and free reserves of the Company as on March 31, 2015) (“Minimum Buyback Size”).

Based on the minimum buyback size and the maximum buyback price, the Company will purchase a minimum of 2,242,024 (comprising around 1.3% of the existing paid-up capital), equity shares.