ISLAMABAD: Kohinoor Textile Mills Limited (KTML) has decided to buy back 30 million of its ordinary shares, the company announced to the Pakistan Stock Exchange (PSX) on Monday. This is the second such buy-back announcement in 2023 after Kohat Cement Company Limited (KOHC) announced the same last month.
The KTML’s notification to the PSX read: “The Board of Directors of Kohinoor Textile Mills Limited in its meeting held on February 06, 2023, has accorded approval to the company, subject to approval of shareholders by way of special resolution, in order to purchase/buy-back of its own shares through Pakistan Stock Exchange Limited upto a maximum of 30,000 000 constituting 10.023% of the issued ordinary shares of the face value of Rs 10 each at the spot / current share price prevailing during the purchase period in cash and out of distributable profits of the company.”
The principal business of KTML is the manufacturing of yarn and cloth, processing and stitching the cloth and trade of textile products. The decision of the board of KTML to buy-back shares will need to be approved through a special resolution passed by the shareholders in the next Extraordinary General Meeting (EGM) of the company. The EGM will be held on March 3. The proposed buy-back period will start from March 13 to August 29.
The purpose of the buy-back is the cancellation of shares and will be made out of the distributable profits of the company. According to the company, the reduced share capital after the buy-back will improve the earnings per share, future dividends, and break-up value of the company’s shares. In addition, it will also allow an opportunity of exit to those investors who wish to liquidate their investments in the company’s stock.
In 2022, six major companies on the PSX announced share buybacks. The uncertain economic situation in Pakistan reduced the share prices of many profitable and established companies which made their valuations attractive. Due to a lack of institutional and foreign investors in the market, these companies decided to take advantage of the decline in their share prices to buy back their own shares.
It started with NETSOL in May (two million shares), followed by Maple Leaf Cement (25 million shares), then Lucky Cement (10 million shares), JDW Sugar Mills (two million shares), then BAFL (200 million shares), and finally ENGRO (70 million shares). Except for the ENGRO buy-back, which is yet to start, all previous buy-backs have been completed.
We wrote a featured piece for Profit magazine at the end of last year titled ‘2022: the year of share buybacks’. The article predicted that “it might even be the case that the buybacks have only just started, and next year in 2023 we may see even more buybacks than the ones we saw in 2022. Time will tell.” After KOHC, the KTML announcement is the continuation of the buy-backs we saw last year.
On Monday, the share price of KTML opened at Rs 46.5, reached a high of Rs 49.45 and finally closed at Rs 48.77, a daily increase of 6.02%. The volume traded was also a massive 1,909,500 shares.
