KPR Mills falls on buyback withdrawal

KPR Mills is one of the top five losers on the BSE since morning. Volumes have jumped up over 19 times. The stock has fallen after 3 days of consecutive gain. Today, it opened 6% lower at Rs.571.25, going down to its intraday low at Rs.570.05, a fall of 6.24%.

Tamil Nadu based KPR Mill is one of the largest vertically integrated Apparel manufacturing companies in India producing Yarn, Knitted Grey & Dyed. Fabric and Readymade Garments.

The FM in the Budget, proposed an additional tax of 20% in case of buyback of listed shares by the company. This is being done to avoid dividend distribution tax thro’ buybacks. Thus effective 5th July’19, the exemption enjoyed by the shareholder of a listed company on income arising on account of buyback of shares has been withdrawn.

KPR Mills had planned to buyback 5.17% of the total share capital at a price of Rs.702/share. Naturally, post this the share price shot up like a rocket. But then the tax proposal has now forced the company to withdraw its buyback.

The company stated, “we have today filed with SEBI our communication conveying that the increase in the amount of Buyback obligation due to the tax proposal in the Finance Bill 2019 was neither contemplated nor prevailing at the time of the consideration and the approvals of the Board and Shareholders. We are not permitted to meet the Buyback obligations beyond the amount approved by the Board of Directors and Shareholders of the Company and the same can also be effected only with the borrowed funds, which is prohibited by law. In the above circumstance, we are unable to file the 'Letter of Offer ' and go forward with the proposal, which has been intimated to SEBI.”