Rally & Rout: Buyback call-off dashes hopes of a quick buck

Mumbai: Retail investors buying beaten-down mid-caps on expectations of making a quick buck on buybacks had a rude shock recently after three of the companies — Vakrangee, PC Jewellers and Kwality — cancelled the proposed share repurchases despite announcing them earlier.These three companies have destroyed about 90 per cent of investor wealth if the yearly highs were taken as the base. While the mechanism of a buyback to manage stock prices is not new, the brazenness with which it is done recently is strange, prompting market participants to seek a regulatory probe into the event flow and share transactions. 65017895 “Sebi should take a proactive role and investigate the entire episode of buyback announcements and cancellations by these three companies and the shares transactions during this period,” said Shriram Subramanian, founder, InGovern Research Services. “Companies in financial mess are in collusion with operators to manipulate the stock price — something the regulator should probe.”Earlier, companies used to keep the buyback plans in abeyance after announcement. So, SEBI made changes in Buyback Regulations, saying that the exercise must be completed within one year from the date of passing the resolution. But these companies are overcoming this hurdle by cancelling the buyback plan.PC Jeweller on Friday withdrew buyback plans for shares worth Rs 424 crore: As a result, the stock tanked more than 27 per cent on Monday. The stock price had rallied 82 per cent from Rs 111 to Rs 201 between May 2 and May 11 after the company announced its buyback at Rs 350 per share. On Monday, it closed at Rs 89.On February 12, 2018, Vakrangee announced a buyback after its stock fell almost 50 per cent in a month. The stock rallied 25 per cent within 3 trading sessions after the announcement. Last month, the company cancelled the proposed Rs 1,000-crore plan.Earlier this month, Kwality said its board has deferred the buyback and bonus issue. The stock has declined 35 per cent so far in July.“Sebi should take stringent action against the directors… if there is any insider trading between the announcement and cancellations,” said Ashok Bakliwal, president, Bombay Shareholder’s Association.

from The Economic Times https://ift.tt/2mlDPG5