If the share buy-back programme is successful, Anil Agarwal's Vedanta Group ownership in Cairn India will rise to 64.53% from 58.76%.
New Delhi: Billionaire Anil Agarwal's Cairn India has bought less than 2% of the 1.70 million shares it is looking to buyback to give the mining baron greater control over the nation's largest private oil producer.
Cairn on 23 January launched its first ever buy-back of share for extinguishing them. The issue where Cairn will spend Rs.5,725 crore out of its cash reserves of Rs.13,707 crore, is to close on 22 July.
"Till March 31, 2014, we have bought back 3,270,549 shares for a total consideration of approximately Rs.106 crore from the open market through stock exchanges," the company said in its fourth-quarter earnings statement.
Cairn wants to buy as much as 1.70 million shares, or 8.9% of the equity, from the open market at not more than Rs.335 apiece in the buy-back programme.
If the programme is successful, Agarwal's Vedanta Group ownership in Cairn India will rise to 64.53% from 58.76%.
"On the backdrop of strong cash flows generated through our operational excellence and world class asset base, we have also opened the Equity Share Buyback programme as a shareholder reward mechanism, at a price not exceeding Rs.335 per share," it said.
Cairn dropped 3.27% to close at Rs.353.30 on the BSE on Wednesday.
The buy-back hinged on participation of the firm's former promoter, Cairn Energy Plc of UK which still holds less than 10% stake in the company.
However, it has been barred by the income tax department from disposing of its residual stake in the firm pending settlement of a tax dispute relating to alleged capital gains it made in 2006-07.
UK's Cairn Energy sold a majority stake in Cairn India to the Vedanta Group at Rs.355 a share, a level the scrip scaled for the first time in last one year in April.
The maximum buy-back price represents an over 4% premium compared to the average of the weekly high and low of the closing share price of the company on the stock exchanges during the two weeks preceding the board approval on 26 November, the company had said announcing the share buy-back in January.
A buy-back is a process where a company repurchases outstanding shares to reduce their number in the market.
Companies buy back shares to increase their value by reducing supply or to eliminate potential threats by shareholders who may be seeking a controlling stake.
While a buy-back is considered an efficient way to return capital to shareholders, it also indicates the company does not have significant capital expenditure plans and may not be looking at any major acquisitions.
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