NIIT Shares Rallied After Company Announces Buyback On April 12, 2021

NIIT share price rallied 19.98 percent to gain Rs 27.55 and closed on Rs 165.45 ahead of the buyback news.

The company announced its plans to buy back shares from existing shareholders, beginning on April 12. In a letter submitted to the BSE, NIIT mentioned that it had received all necessary approvals from the market regulator. It will send a buyback letter soon to eligible shareholders appearing in the record date of February 24, as or before April 5, 2021. NIIT has set the buyback price at Rs 240, a 52 percent premium of the market price.

NIIT’s Board of Directors meeting last December approved the buyback proposal of 9,875,000 equity shares amounting to Rs 237 crore.

NIIT is a small-cap skill and talent development firm established in 1981, has a market capitalisation of Rs 1962.94 crore. The company offers multi-disciplinary training and development solutions to corporations, institutions, and individuals. It is one of the leading talent development companies providing services to over 40 countries. In the third quarter of FY 21, NIIT’s profit grew 53 percent to 41.5 crores.

Companies buy back shares for various reasons, when it needs consolidation or an increase in equity share values or when it needs to appear financially attractive. However, buyback involves expenses. NIIT is offering a buyback price, which seems attractive to existing shareholders. The value is 72.91 percent premium against the previous closing of Rs 138.80 on BSE on March 30, 2021.

On the buyback news, NIIT shares jumped several points and open high on April 1, 2021.

The offer will close on April 28, 2021. According to SEBI Buy Back Regulation 2018, the firm will send a Letter of Offer to all eligible shareholders. The total buyback volume doesn’t exceed 25 percent of the aggregate of the total capital and paid-up equity capital and free reserved as per audited reports.

Who Are Eligible For The Buyback?

All investors on the record date of February 24, 2021, on or before April 5, 2021, holding physical NIIT shares in their Demat account are eligible to receive a Letter of Offer.

Investors can participate in the offer by selling their shares on BSE and NSE during the buyback period of April 12-28, 2021. On May 7, 2021, investors will receive the amount for accepted shares on their account, and unaccepted shares will return to their Demat.

The success of a buyback offer depends on the participation of existing shareholders. Previously, Vedanta Ltd. share buyback activity was unsuccessful due to a lack of involvement from shareholders. NIIT buyback proposal looks attractive at a premium value of Rs 240, but the time size given for the buyback is less, affecting the acceptance ratio.