Airtel Africa, an Indian multinational company that provides telecommunications and mobile money services in 14 countries in the continent, has splashed a whooping sum of £48 million to buy-back the 491,861 shares held by Citigroup Global Markets Limited.
Fintech Telex understands that Airtel Africa made this disclosure via a notice addressed to the investing public.
In the notice cited by this write, Airtel Africa stated that it purchased the number of its ordinary “shares of $0.50 each on the London Stock Exchange from Citigroup Global Markets Limited pursuant to the authority granted by its shareholders as part of its share buy-back programme.”
The tech giant acquired the 491,861 shares on Friday, March 1, 2024, at a weighted average price of £97.14 per share.
“The Company has entered into an agreement with Citigroup Global Markets Limited to conduct the first tranche of the buy-back and carry out on-market purchases of its ordinary shares with the Company subsequently purchasing its ordinary shares from Citi.
“Under this agreement, Citi will act as riskless principal and will make decisions independently of the Company. The sole purpose of the buy-back programme is to reduce the capital of the company. As such, all shares purchased under the buy-back programme will be cancelled,” the notice read further.
What you should know About Airtel Africa’s buy-back program
Airtel plans to return $100 million to shareholders over up to 12 months. This program, according to the company, would be done in two tranches, with the first ending on Saturday, August 31, 2024.
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Airtel stated that it would spend a maximum amount of $50 million in the first tranche.
Why Do Companies Initiate Share Buybacks?
- Increase Share Price: By reducing the number of outstanding shares, basic earnings per share (EPS) can potentially increase, making the stock more attractive to investors and driving up the share price.
- Signal Confidence: A share buyback program can indicate the Airtel’s confidence in its future prospects and financial health. The company essentially uses its excess cash to invest in itself, suggesting strong cash flow and a belief that the stock is undervalued.
- Enhance Shareholder Value: Repurchasing shares reduces ownership dilution, potentially increasing the value of remaining shares held by existing investors.
- Improve Capital Structure: Buy-backs can improve the company’s capital structure by reducing the debt-to-equity ratio.
Implications for Airtel Africa
Airtel Africa’s share buy-back program suggests several positive possibilities for Airtel, including the following
Boosting Investor Confidence: The program can signal Airtel Africa’s management team’s belief in the company’s future potential, potentially leading to increased investor confidence and a rise in the stock price.
Enhanced Financial Flexibility: The buyback demonstrates Airtel Africa’s healthy financial position, with sufficient cash reserves to invest in itself while continuing regular operations.
Increased Earnings Per Share (EPS): By repurchasing shares, Airtel Africa reduces the number of outstanding shares. This can potentially lead to an increase in EPS, even if the company’s overall profit remains constant.
Impact on Citigroup Global
For Citigroup Global, selling shares to Airtel Africa presents a straightforward transaction:
- Profitability: Citigroup earns revenue from the sale of these shares. The profit depends on the difference between the purchase price (when Citigroup acquired the shares) and the selling price to Airtel Africa.
Are Airtel shareholders smiling from this buy-back program?
Shareholders of Airtel Africa are likely to be impacted by this buy-back program..
- Potentially Increased Share Price: A successful buyback program can lead to a rise in the share price, benefiting existing shareholders.
- Enhanced Return on Investment (ROI): If the share price increases due to the buyback, shareholders who hold onto their shares could see a better return on their investment.
