- Wealth PMS
In a board meeting, Indo Asian Fusegear has decided to buy back shares at a price upto Rs. 130 from the market, for a total amount of Rs. 23.19 crore.
This is a terribly disappointing strategy for multiple reasons.
I think this market buyback is a problem because it closes the door to a regular buy-back (that is, through a tender offer where every shareholder can have some of his shares bought back) for at least a year. Plus, it’s terribly opaque – while they do announce the shares bought back, there is no requirement to buy it back compulsorily. So on days that the shares do badly you would think the promoters would buy a lot of shares, but in reality, they don’t.
That they chose to do the market buyback, the least effective of such measures, leaves me with little to say other than that I am losing confidence in this company. I am now uncomfortable with the promoters in that they first tried to do a dirty merger with a promoter company (which they withdrew), and now they choose an option that stinks. I will look at the reports of buy-back, and if they are doing silly things like NOT buying back a ton of shares at the current price of Rs. 80, I shall sell my holding.
This company has a greater amount in the bank than the current market-cap. That’s why I liked it. The other two companies I’ve looked at, that have similar cash level comparisons, have taken different approaches. Smartlink offered Rs. 30 per share as dividend (I had bought at Rs. 76) and Piramal Healthcare went for both a buyback and a big dividend.