Promoter holding in Welspun Enterprises rises to 44% post buyback

Mumbai: Promoter holding in Welspun Enterprises, the BSE listed company part of the Welspun group, has risen to 44% from 37% post its share buyback offer that closed in March. Welspun did a buyback of shares through a tender offer in March at Rs 62 per share. At the same time, the promoters bought 1.5 million shares from the open market. Post the buyback of the shares, promoter shareholding has gone up.

Welspun’s share price rose 4.43% on Monday to close at Rs 87 as the company announced that it had bought 2.7 crore shares from market under its buyback scheme and cancelled them. Post the buyback, the total number of shares outstanding for Welspun fell from 174 million to 147 million. The market-cap of the company stood at around Rs 1,521 crore as on Monday.

Share price has gained over 32% since the beginning of March. In a conference call recently, the company said it had a joint venture with Adani Group to explore oil and gas fields and had acquired blocks in Mumbai and Gujarat. With one of the blocks having proven reserves of around Rs 1,000 crore. Adani Welspun Exploration Limited (AWEL), in which Welspun Enterprises holds 35% stake, was awarded contract area B-9 cluster by the government in the recently concluded bidding of the Discovered Small Field Bids Round (DSF 2016). The area of the cluster is 183 sq.km, and comprises of three offshore fields, B-9, B-7 and BRC, located in the Mumbai Offshore basin. The block is in close proximity to AWEL's prospective exploratory block (MB/OSN/2005/2) and ONGC's B-12 area, which is under advanced stage of development.

The company has a Hybrid Annuity Model (HAM) business in which it has already won one contract worth Rs 850 crore and has bid for 5 further projects. They expect to have an order book of Rs 2000-3000 crore in the coming years. That could yield EBITDA (earnings before interest, tax, depreciation and amortisation) of around Rs 200crore annually just from the construction contract on HAM project. Analysts say, this alone may translate to around Rs 10-12 per share in earnings per share post tax. Those tracking stock further say that the company is likely to get high equity IRR (internal rate of return) from its investments over the time and its exploration business alone could be valued at around Rs 100-150 per share. The company is debt free and cash per share of around Rs 67 as of now.