KARACHI: JDW Sugar Mills Ltd said on Monday it completed the buyback of two million shares for ultimate cancellation in less than two months of initiating the exercise.

The sugarcane processor started purchasing over one-fifth of the company’s free float — which is the shareholding that’s in the hands of public investors as opposed to locked-in shares held by sponsors — in small chunks on Nov 11 at the rate prevailing in the stock market.

Speaking to Dawn, JS Global Assistant Vice President Waqas Ghani said the company bought back its shares at a weighted average price of Rs439.44 apiece. The size of the buyback transaction is, therefore, Rs878.9m, he said.

“The share buyback indicates that the company likes its own stock enough to purchase it from the general public,” said Mr Ghani.

Companies buy back their stocks to either cancel them altogether or hold them as treasury shares. Both moves result in the reduction of the number of outstanding shares available in the open market. The exercise results in higher earnings per share as their total number of shares goes down and break-up values improve.

JDW Sugar Mills’ decision to buy back its shares was aimed at improving its “future financial position”. It used the funds from its “distributable profits” and utilised its “internally generated cash flows” for the transaction.

The volume of buyback transaction (2m) has reduced the number of outstanding shares of JDW Sugar Mills from 8.96m to 6.96m.

Many listed companies have carried out share repurchase exercises in the ready market in recent months. For example, Bank Alfalah Ltd completed its buyback of 200m shares last Friday in what constituted the biggest repurchase transaction (Rs6bn) executed so far in Pakistan.

Earlier, Netsol Technologies Ltd and Maple Leaf Cement Factory Ltd bought back portions of their respective outstanding shares. The buyback of Lucky Cement Ltd is still in process as the cement maker has acquired about 36pc of the intended volume so far.

In addition, Engro Corporation Ltd will also begin buying back its shares from February 3 in an exercise that’s expected to surpass the Bank Alfalah transaction in terms of both volume and value of shareholding. Going by the closing rate on Monday, Engro Corporation’s buyback of 70m shares should be worth around Rs18.9bn. The targeted volume constitutes 12.1pc of the company’s total outstanding shares.

The changes in buyback regulations were introduced via an amendment to the Companies Act 2017 on Dec 4, 2021. Now the repurchase can only be made through the stock exchange on the basis of the prevailing share price. This is different from the previously allowed method of a tender offer, which involved a company asking stockholders to sell shares for a specific price at a predetermined time.

Published in Dawn, january 3th, 2023