Rising equity market, Sebi norms pulled down open offer, buyback activity

To safeguard the interest of small shareholders and check manipulation of share prices by companies, the Securities and Exchange Board of India (Sebi) had cracked the whip by amending the buyback norms in August 2013.

This has been a reason for the low number of buybacks in 2014. Compared to 2013, the acquired amount through the buyback plugged by over half (56 per cent) to Rs 3,032 crore (as compared to Rs 6,892 crore).

Similarly, the value of the offer amount in 2014 dropped by 38 per cent to Rs 8,939 crore (against Rs 3,032 crore).

According to Delhi-based Prime Database, of the 33 buyback offer that concluded in 2014, 28 were through the stock exchange and the remaining five were through the tender route.

The largest buyback was of Cairn India for Rs 1,225 crore. As per Sebi's new norm, the buyback was restricted to six months from 12 months.

The most important reason for the downfall in the number of buybacks, open offers and delisting was the surge in the market barometer, with the BSE Sensex scaling higher by 30 per cent in 2014.

This also acted as a deterrent to open offer. According to Prime Database, the number of open offer deals dropped from 81 in 2013 to 61 in 2014.

The value of the amount offered through the open offer also plunged by 51 per cent to Rs 23,106 crore from Rs 47,474 crore in 2013.

The reason for the lower value was because of the base effect, as 2013 saw the Rs 29,220-crore open offer of Unilever PLC for Hindustan Unilever.  

Meanwhile, the acquired amount through the open offer in 2014 was down 31 per cent to Rs 18,912 crore, compared to 27,527 crore in 2013.

The largest offer was by Relay for United Spirits for Rs 11,449 crore.

The other two big open offers were GlaxoSmithKline for GlaxoSmithKline Pharmaceuticals for Rs 6,389 crore and Independent Media Trust for TV18 Broadcast for Rs 1,348 crore.

Going ahead, with the stock market scaling higher, the buyback of shares could remain low.

But with the financial health of many in corporate India not that good, the sale of distressed assets is expected to see a rise.