Reviving Value: Top 5 Stocks with Up to 50% Buyback Premiums

In recent news, the landscape of share buybacks has seen a resurgence. Following the announcement that income from buybacks will now be taxed for shareholders, companies have been eager to announce their buyback plans. This new tax regulation comes into effect on October 1, 2024, prompting a flurry of buyback offers from various firms.

Notable companies such as Indus Towers, Dhanuka Agritech, and Aurobindo Pharma were among the first to jump on the bandwagon. With the tax implications on the horizon, it's anticipated that many cash-rich companies will pursue buybacks in the coming months.

Here's a detailed look at five companies that have recently unveiled buyback schemes, each offering an attractive premium.

1. AIA Engineering

AIA Engineering, a global leader in mill internals production, is a notable player in this buyback wave. The company is renowned for its high-quality mill internals used in cement, power utility, and mining sectors. AIA operates a manufacturing facility in India and has nine marketing entities worldwide, solidifying its dominant position in the market.

Recently, AIA Engineering announced its inaugural buyback, aiming to repurchase up to 1.06% of its total equity, equivalent to 10 lakh shares. The buyback offer is valued at INR 5 billion, with a buyback price set at INR 5,000 per share—representing a 12% premium over its current trading price. This strategic move comes as the company witnesses a robust 167% rise in its stock price over the past five years. AIA’s strong market presence and innovative approaches, particularly in the mill liner market, position it well for long-term growth.

2. Cera Sanitaryware

Cera Sanitaryware has also entered the buyback arena, with its board recently approving a buyback plan valued at INR 1.3 billion. The buyback price is set at INR 12,000 per share, which is about a 25% premium over its current price of INR 9,957. The buyback will cover 9.68% of the company’s total paid-up equity share capital.

Cera has made significant strides in the sanitaryware industry, capturing over 20% of the organized domestic market. Despite challenging market conditions, Cera has managed to boost its sales and profits, driven by strong branding and distribution networks. The company plans to expand its product line and launch luxury ranges, positioning itself to benefit from increased consumer spending on home improvements. Over the past five years, Cera’s stock has surged by 290%, reflecting its solid market position and growth potential.

3. Chamanlal Setia

Chamanlal Setia Exports, a key player in the private label basmati export sector, has announced a buyback worth up to INR 602.4 million. The company plans to repurchase over 20 lakh shares at INR 300 per share—a premium of approximately 20% over the current price of INR 250.

The company's asset-light strategy, focusing on outsourcing semi-finished rice and converting it to finished products, has allowed it to expand its market presence without heavy capital investment. With a diverse client base across 90 countries, Chamanlal Setia has maintained a stable financial profile. The company anticipates an easing of rice export restrictions, which could further benefit its operations. Over the last five years, the stock price has appreciated by around 90%, underscoring its steady growth.

4. TTK Prestige

TTK Prestige recently declared a buyback worth INR 2 billion, with a buyback price set at INR 1,200 per share—a 25% premium over the share’s trading price at the time of announcement. The buyback plan will cover about 9.88% of the company’s equity share capital, with the record date set for August 14, 2024.

TTK Prestige’s stock has increased by 65% over the past five years. The company’s recent rally is attributed to its focus on product innovation and premiumization. Despite some challenges with export markets and rising raw material costs, TTK Prestige remains optimistic about growth prospects in the Indian market. The company is also investing in a new five-year business strategy, which should enhance its long-term growth trajectory.

5. Symphony

Symphony, a prominent player in the air cooling and appliances market, recently announced a buyback of up to 285,600 shares at INR 2,500 per share, a premium of over 100% compared to its recent trading price. This buyback represents 0.4% of the company’s total equity shares.

The company’s stock price has experienced significant growth following the buyback announcement, currently trading at INR 1,600—a 50% premium over its previous levels. Symphony’s recent Q1 results revealed a 270% increase in net profit and a 76% rise in revenue, highlighting strong operational performance and effective cost management. The company plans to continue expanding its product portfolio to meet evolving consumer needs, positioning itself for further growth.

In conclusion, Share buybacks can be a strong indicator of a company’s confidence in its future prospects and often signal that shares are undervalued. Companies undertaking substantial buybacks, such as TCS and Infosys, typically attract investor interest. When combined with other financial metrics, buybacks can offer valuable insights into a company’s long-term potential and provide investors with opportunities to benefit from undervalued stocks.

As these five companies demonstrate, buybacks can offer substantial premiums and reflect a company’s commitment to delivering value to its shareholders.