GAIL (India) Ltd on Thursday said it would buy back about 5.7 crore shares for Rs 1,083 crore as it appears to be using a healthy balance sheet to reward shareholders for the second time in several years.
GAIL has in 2020-21 spent Rs 1,046.35 crore for similar share repurchases.
GAIL’s board of directors approved “the repurchase of approximately 5.70 crore shares at the rate of Rs 190 per share aggregated to approximately Rs 1,083 crore (excluding tax),” the company said in a statement.
The buyback price of equity shares was at a 24 percent premium over Wednesday’s closing price on the NSE.
Stock repurchases are considered a tax -efficient way to reward shareholders. The government owns a 51.80 per cent stake in the company and is likely to participate in the buyback.
In the 2020-21 buyback, the government has received Rs 747 crore.
Share repurchases, or share repurchases, are when a company repurchases its own shares from investors or stakeholders. It can be seen as a tax -efficient alternative way to return money to shareholders.
Repurchases are attractive in tax terms even after considering a 10 per cent tax on long -term capital gains (LTCG).
“The Board approved the repurchase of approximately 5.70 crore shares through a tender offer representing 2.50 per cent of its paid-up capital and free reserves as at March 31, 2021,” GAIL said in the statement.
GAIL consistently rewards its shareholders through fixed dividends, bonus share issues as well as share buybacks at a premium.
In the current financial year (2021-22), the company paid the highest interim dividend of Rs 3,996 crore (at 90 per cent of face value).
GAIL has issued bonus shares in FY 2008-09, 2016-17, 2017-18 and 2019-20. In March 2021, it completed the repurchase of about 6.97 crore shares at Rs 150 each.
GAIL started its business in 1984, as a natural gas delivery company with a single cross -country trunk pipeline and has now become India’s leading natural gas company. It is the largest integrated natural gas marketing and delivery company to have its presence along the entire natural gas value chain.
It owns and operates about 13,840 km, or 74 per cent of the total length of the cross -country natural gas pipeline network in India, in 28 states and Union Territories. GAIL sells about 52 per cent of all natural gas sold in India and 44 per cent of LNG.
The company supplies 67 percent of the gas used in the fertilizer sector, 53 percent in power and 60 percent in the urban gas sector.
With an LNG portfolio of over 14 million tonnes a year and diversification in supply sources and price indices, GAIL is poised to meet customer needs and actively contribute towards the nation’s goal of a ‘gas -based’ economy, the statement said.
The company has also embarked on alternative energy such as green hydrogen, renewable projects and bio-fuels, which are of national interest and are likely to provide a transition into the future.