KARACHI: Thatta Ceme­nt Company Ltd said on Wednesday it wants to buy back up to 15 million of its shares constituting about 15 per cent of the total shareholding at the going rate on the stock market.

The size of the transaction should hover around Rs215.5m at the prevailing share price of Rs14.37 apiece.

The purpose of the exercise is to hold the reacquired shareholding as treasury shares, which don’t count towards the outstanding shareholding available in the open market.

“The proposed buyback will have a positive effect on the future financial position of the company, including the breakup value of the company’s shares and its earnings per share. The buyback will also provide an opportunity of exit to those members who wish to liquidate their investment, fully or partially,” it said.

Many listed companies have carried out share repurchase exercises in the ready market in the recent past. The total number of shares goes down once a company conducts a buyback, leading to an increase in its earnings per share as well as its break-up value — the amount that the company would be worth if it was liquidated.

Thatta Cement Comp­any Ltd will start buying back its shares on November 2 and keep repurchasing the stocks until April 23 next year 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 50pc to 35pc.

Some analysts believe the reduction in the volume of tradeable shares is bad for the stock market. Others say the exercise provides investors with a higher share price to liquidate their investments in an otherwise bear market.

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

Companies that’ve completed share buybacks in recent months include Maple Leaf Cement Factory Ltd, Netsol Techno­logies Ltd, JDW Sugar Mills Ltd, Bank Alfalah Ltd, Lucky Cement Ltd, Engro Corporation Ltd, Kohat Cement Company Ltd, Habib Bank Ltd and Kohinoor Textile Mills Ltd.

Fresh rounds of buybacks by Lucky Cement Ltd and Habib Bank Ltd along with the first share repurchase exercise by TPL Properties Ltd are currently underway.

Published in Dawn, September 28th, 2023