FMCG major Hindustan Unilever (HUL) on Friday said its board has approved buying back shares worth Rs 630 crore from the market at a price of Rs 280 per share, to utilise its surplus cash.

“The company proposes to buy back shares from the Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE) through open market purchases from time to time,” HUL said in a statement.

The company said its Board of Directors at a meeting held today has approved “the buyback of the company’s equity shares at a price not exceeding Rs 280 per share and up to an aggregate amount of Rs 630 crore.”

HUL said the buyback price is at a premium of 20 per cent over the average closing price of the company’s shares in the last three months.

“The buyback is proposed to effectively utilise the surplus cash and make the balance sheet leaner and more efficient to improve returns,” it added.

The board said it has decided to seek the approval of shareholders for the proposal to buyback shares of the company up to 25 per cent of the paid capital and free reserves in terms of section 77A of the Companies Act, 1956.

According to March quarter shareholding pattern data available with the National Stock Exchange, the promoters at present hold a 52 per cent stake in HUL.

The last time the company went for a buyback of shares was in July, 2007. The FMCG major’s latest proposal is driven by a good show in the personal products segment and a 47 per cent climb in profit to Rs 581.20 crore for the quarter ended March 31, 2010.

Net sales of the firm for the quarter stood at Rs 4,315.7 crore, compared to Rs 3,988.33 crore a year ago. It has also declared a final dividend of Rs 3.50 per share for the fiscal ended March, 2010.

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