Emami board approves share buyback as Q3 profit rises
Premium- Emami Q3 results: Revenue from operations increased 4% to ₹971 crore during the third quarter
Emami Ltd on Thursday said its board has approved a buyback of shares not exceeding ₹162 crore as it announced quarterly results.
The consolidated net profit after tax (PAT) rose 5% to ₹219 crore for the December quarter as against ₹208 crore reported in the year-ago period.
Revenue from operations increased 4% to ₹971 crore during the third quarter as compared to ₹933 crore in the same quarter last year.
The company's board has also approved ₹4 per share interim dividend for the current financial year.
After the announcement, Emami shares were trading down 1.38% at ₹501.30 on NSE.
The buyback will be executed at a share price not exceeding ₹550.
Share buyback, or share repurchase, is when a company buys back its own shares from investors or stakeholders. It can be seen as an alternative, tax-efficient way to return money to shareholders.
Buybacks are attractive in tax terms even after considering the 10% tax on long term capital gains (LTCG).
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Usually, companies go for share buyback if it wishes to increase demand in the market. Share buybacks reduce the number of shares in circulation, which can increase the share value and the earnings per share (EPS).
When a company buys back shares, it results in a reduction of the number of shares outstanding and the capital base. To that extent, it improves the EPS and the ROE of the company. When the EPS goes up, assuming the P/E remains constant the price of the stock should also go up.
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