InvestorQ : Why is NTPC doing a buyback of shares?
Arusha Ray made post

Why is NTPC doing a buyback of shares?

3 years ago

Here is what you need to know about the NTPC buyback which has just been approved by SEBI.

· While approving the NTPC buyback, SEBI granted NTPC exemption from certain buyback norms for the proposed merger of wholly-owned subsidiaries with the parent. It had filed with SEBI for an exemption as a special case.

· This applies to the SEBI approved merger of Nabinagar Power Generating Company Ltd and Kanti Bijlee Utpadan Nigam Ltd into NTPC. The scheme of amalgamation had already been approved by SEBI, and now an exemption has also been granted.

· Currently, the government has asked a slew of PSU companies to buy back shares to bankroll the divestment program. However, under SEBI guidelines, NTPC was not allowed to buy back its own shares as the amalgamation was pending at the time of the public announcement.

· NTPC has sought a special exemption from the provision which prohibits a company from making public announcement of buy-back during the pendency of any scheme of amalgamation under the Companies. This exemption has been granted.

· Justifying the need for the exemption, NTPC had stated that the proposed buyback by NTPC would be in the larger interests of investors as the shareholders of the company will benefit from return of surplus cash through the buyback programme at an attractive price, which is normally at a premium to the traded price.

Most of the cash rich companies have been asked by the government to buy back the shares so that the government can tender shares in the company and get compensated without diluting control of the PSU.