Saraswati Commercial (India) Ltd., a little-known firm listed on the BSE, has created a record of sorts. The company, whose market capitalisation is a mere ₹1.52 crore with shares last traded at ₹14.71 apiece, has announced a buyback offer worth almost ₹6 crore at ₹978 per share.
Never before in the history of Indian equity markets has a company offered to buy back shares at such a premium to its market price. The Mumbai-based non-banking finance company (NBFC) is paying close to 67 times the market price.
The buyback is being done as the company said it believed the current market price does not reflect the fair value of the stock, said a senior official of the company whose main business activity is “investment, trading in shares and securities and lending activities”.
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The firm’s annual report said it held shares worth nearly ₹60 crore in various listed entities along with ₹35 crore worth of shares in unlisted entities.
“The company was merged with another listed group entity named Aroni Commercials in FY17. But the current market price of Saraswati does not reflect the intrinsic value of the merged entity and hence the buyback route was decided... so that shareholders can get an exit option at a fair value,” said an official on conditions of anonymity.
The shares of Saraswati Commercial were traded last on December 29.
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“The company wanted to give... [an] exit option to investors at the intrinsic value,” said G.S. Ganesh, founder, Inga Capital, the merchant banker managing the buyback offer. “The buyback offer price is a fair proposition by the company for the minority shareholders.”
While promoters hold 73.35% stake in the NBFC, the balance 26.65% is held by the public. The firm will buy back up to 60,000 equity shares. The promoter and promoter group intend to tender 40,842 equity shares — 68% of the maximum buyback size — in the offer.
‘Little benefit for public’
Corporate governance experts said though the firm had high intrinsic value due to its assets, shareholding pattern showed it was closely-held with public getting no benefits of listing.
“This is more a case of getting tax benefits by tendering shares on a stock exchange platform as the firm has no reason to be listed since it is so closely-held,” said J.N. Gupta, MD, Stakeholders Empowerment Services, a proxy advisory firm.