KARACHI: Engro Corporation Ltd told investors on Thursday it wants to buy back up to 70 million of its shares from the stock market for the purpose of cancellation.

The move is aimed at improving the earnings per share of the company, it said.

Of late, many listed companies have carried our share repurchase exercises in the ready market. The total number of shares goes down once a company conducts a buyback, leading to an increase in its break-up value and profit per outstanding share.

In terms of its size, the transaction is going to be the largest of its kind to date, according to Alfalah CLSA Ltd. Going by the closing rate on Thursday, the total buyback should be worth around Rs19.4 billion. The targeted volume constitutes 12.1pc of the company’s total outstanding shares.

Engro Corporation will start buying back its shares from Feb 3 next year. It’ll keep repurchasing the shares until July 25 or the date when the targeted volume is achieved. At the conclusion of the buyback exercise, the company’s free float — shares that’re available for the public to buy and sell — will have gone down from 55 per cent to 49pc.

The conglomerate will use the funds from its “distributable profits” to repurchase its shares at the price prevailing on the stock exchange during the purchase period.

“It will provide an opportunity of exit to those members who wish to liquidate their investments,” it said.

Other companies that have either conducted or are still exercising share buybacks are Lucky Cement Ltd, Maple Leaf Cement Factory Ltd, Netsol Technologies Ltd, Bank Alfalah Ltd and TRG Pakistan Ltd.

A share buyback is usually an indication that the company likes its own stock enough to buy it back. Engro Corporation’s share price rose 2.86pc to Rs276.72 apiece on Thursday.

Published in Dawn, December 16th, 2022