Plastic maker to hold share buyback

The share price of Synthetic Products Enterprises Ltd (SPEL) shot up 11.4 per cent on Monday after it announced its upcoming share buyback exercise. The manufacturer of plastic auto parts and packaging material said it wants to buy back up to 9.98 million of its shares from the stock market at the going rate. The size of the transaction should hover around Rs97.5m at the prevailing share price of Rs9.77 apiece. The purpose of the exercise is to hold the reacquired shareholding as treasury shares, which represent the stockholding that a company keeps in its own treasury and doesn’t count towards the outstanding shares available in the open market. “The purchase will have a positive effect on the financial position of the company (as) the free cash will be converted to treasury shares,” 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.