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Britannia: Buyback bonanza

Jun 14, 2001

Britannia Industries has pegged the buyback of its shares at a price not exceeding Rs 750 per share. The company plans to buyback upto a maximum of 1 million equity shares, at an outflow of not more than Rs 550 m for this purpose. This was decided at the company’s board meeting held today. However, this offer is subject to the approval of its shareholders in the ensuing AGM slated on 28 July 2001.Britannia is India’s largest bakery products manufacturer. It dominates the Rs 30 bn branded (organised) biscuits segment with a 38% (value-terms) market share. It is also a dominant player in the organised bread and cakes segment. Currently, Britannia is focusing on expanding its business to dairy products like cheese, butter, flavored milk and dairy whiteners.

The maximum buyback price (Rs 750) is at a 15% premium to the prevailing market price. The Britannia stock closed at around Rs 652 today. But this (maximum) offer price is at an 11% discount to the stock’s 52 week high of Rs 839.

If the company does manage to buyback 1 m equity shares through this offer, its share capital will stand reduced to Rs 269 m. Britannia’s earning per share (in FY01) will improve from Rs 21.1 to Rs 21.9 per share.

However, it is interesting to note that the company is looking to buyback 1 m shares by paying a maximum of Rs 550 m, thereby indicating its willingness to shell out Rs 550 per share. Does this mean that the management perceives the fair value of the Britannia share to be Rs 550? Or is it Rs 750?

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