Why HPCL buyback and not NTPC’s made Street happy

Mumbai: State-owned companies HPCL and NTPC announced their share buybacks around the same time but their share prices have seen divergent behaviour since then. While shares of oil marketer HPCL have rallied 16 per cent following the announcement early in November, thermal power generator NTPC is up 4 per cent. Analysts said this is because of the different routes that both the companies have taken to buy back shares from public investors.HPCL’s buyback is being done through the open market over six months, while NTPC’s buyback is through the tender offer process. Analysts said NTPC has investors who are not tendering shares in the offer, as reflected in the acceptance ratio of 16-20 per cent, as the buyback price is lower than market expectations.HPCL could mop-up from the secondary market over 13 per cent of the shares available with public shareholders over a six-month window at Rs 250 per share as against the current market price of Rs 214. NTPC is buying back shares at Rs 115, a 25 per cent premium at current market price through the tender offer.“HPCL was more liberal in terms of deciding buyback price range up to Rs 250 through open market route,” said Binod Modi, head of strategy, Reliance Securities. “However, NTPC’s buyback price of Rs 115 through the tender route was significantly below the Street's estimate.”79376696In an open market buyback through the order matching mechanism, the buyback is required to close within six months from the date of opening the offer. Buyback through the tender offer is required to close within 10 working days from the date of opening. Promoters cannot participate in the open market buyback.“The HPCL buyback will create value for all shareholders as the intrinsic share value is a lot more than the current market price and even the Rs 250 per share maximum buyback price,” said Sabri Hazarika, analyst, Emkay Global.“Buyback through the open market will lend support to the stock price as the company will buy shares as and when the stock price declines,” said Siddhartha Khemka, head- retail research, Motilal Oswal Financial Services.

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