Shares of Bajaj Auto were up on Tuesday after the automaker announced a large share buyback at a hefty premium.

What Happened: Bajaj Auto Ltd’s board approved a ₹4,000 crore share buyback on January 8, with each share priced at ₹10,000, representing a 43% premium over the last closing price.

The buyback involves 40 lakh shares through the tender route, equivalent to 1.41% of the company’s outstanding shares. Promoters, who currently hold a 54.94% stake, will also participate in the buyback.

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A buyback committee has been formed, and the board has delegated powers for all necessary actions related to the buyback at its discretion. Shareholder approval through a special resolution via a postal ballot is required, and further details, including record dates, will be announced later.

This marks Bajaj Auto’s second share buyback in two years. In July 2022, the company bought shares worth ₹2,500 crore at ₹4,600 per unit. Managing Director Rajiv Bajaj mentioned in a recent interview that this buyback would be more substantial than the previous one.

Bajaj Auto anticipates ending the financial year 2024 with a cash balance of ₹20,000 crore, as per Rajiv Bajaj, who highlighted the company’s excellent performance in 2023.

The stock has surged over 93% in the past year, making it the second-best performer on the index, following Tata Motors.

Price Action: Bajaj Auto’s share price shot up 2.25% to ₹7,141 near the start of trade on Tuesday.

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