Cairn India to consider share buyback on Tuesday

The board of directors of Cairn India will on Tuesday consider a proposal to buyback shares, a move that will help promoters Vedanta group increase its stake in the company without putting any money.

Cairn, which is sitting on a cash pile of about $3 billion, in a filing to the stock exchanges said, “a meeting of the board of directors of the company will be held on November 26 to consider the proposal for buy back of equity shares of the company.”

Share buy back is the process where a company repurchases outstanding shares to reduce the number of shares on the market. Companies, as a rule, buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.

As per SEBI rules, Cairn will buy a pre-decided quantity of shares from the market at a rate which is likely to be higher than the current trading price. Such shares will be held as treasury stock and eventually extinguished. This will lead to its promoter Vedanta group’s stake in the company going up without putting any money.

Anil Agarwal-led Vedanta group holds 58.76 per cent stake in Cairn India.

U.K.’s Cairn Energy may look at the share buyback programme to exit.

Shares of Cairn India surged by 4.96 per cent to Rs 326.95 on the BSE. On the NSE, the stock ended 3.23 per cent higher at Rs.327.50.