Asian share markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1.1% while the Hang Seng is up 0.7%. The Shanghai Composite is trading up by 1.7%. US stocks fell on Wednesday, breaking a four-session streak of gains after Washington's threat to impose tariffs on an additional US$ 200 billion worth of Chinese goods fanned trade war fears, while a sharp drop in oil prices hit energy shares.

Back home, India share markets opened the day on a strong note. The BSE Sensex is trading up by 203 points while the NSE Nifty is trading up by 67 points. The BSE Mid Cap index and BSE Small Cap index both opened up by 0.7%.

The rupee is currently trading at 68.83 to the US$.

Barring IT stocks, all sectoral indices opened the day in green with energy stocks and PSU stocks witnessing maximum buying interest.

In the news from the IT sector. In the latest development, HCL Technologies is planning to buyback shares for about Rs 50 billion, offering Rs 1,100-1,150 per share.

The promoters-Shiv Nadar and his family - are expected to participate in the buyback.

Reportedly, the Rs 50-billion buyback will be at a premium of 17-20% to the closing price last Monday, when it had announced the intent of buyback.

Last year, HCL Tech bought back shares for Rs 35 billion at Rs 1,000 apiece, a 17% premium over the prevailing trading price at that time.

The company, with a market capitalization of Rs 1385.5 billion, aims to maximize the return of cash to shareholders. Rewarding shareholders with special dividend would have attracted dividend distribution tax.

In a buyback, the shares are tendered through the stock exchange and attract securities transaction tax, which is negligible compared to dividend distribution tax.

Note that, Tata Consultancy Services declared a Rs 160 billion share buyback programme last month, offering to buy back shares at a premium of over 15% at Rs 2,100 per share.

The HCL Tech promoters, with a holding of over 60%, will end up mobilizing over Rs 30 billion through this route, without diluting their stake.

In 2017-18, the number of buyback offers were at an all-time high. Never, in the last two decades, had Indian markets seen fifty-nine companies announcing buyback plans.

But what is truly surprising is that unlike in the past, the buybacks this time seem skewed in favor of short-term investors rather than long-term ones.

Who Benefits from Such Buybacks?

Tanushree Banerjee, Co-head of Research at Equitymaster recently wrote about it in The 5 Minute WrapUp:

• "Look at the history of buybacks since 2002. Logically promoters should offer to buyback shares at a premium when the stock is undervalued. And this logic held true until recently. The number of buybacks peaked when market valuations were low. And in times of peak valuations (like 2007 and 2011), promoters refrained from doing so.
  
  But not this time. The trend of rising buybacks in the last two years, resembles the sentiment of a momentum investor. The appetite to buy shares kept rising with the rising markets. And the latest buybacks of stocks like TCSand MOIL, came at a time, when neither the broader index (Sensex) nor the stocks themselves, are undervalued."

At Equitymaster, we believe, as a shareholder in cash-rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

It's a matter of time before you get to use the cash for buying stocks, you've always wanted to, at attractive bargains.

HCL Technologies share price opened the day up by 2.1%.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Cipla, through its South African subsidiary, Medpro South Africa, has acquired 100% stake in another South African company, Mirren Pty, for Rs 2.3 billion (450mn South African Rand).

Mirren is a 35-year-old South African OTC pharma company.

Reportedly, it has a well-established brand portfolio such as Bronco cough syrup, Coryx, Tensopyn, and Ultimag. Mirren's FY18 revenue grew by 23.7% yoy to 152mn Rand (Rs 773 million).

Cipla has said that Mirren's well-established brands will increase its local manufacturing footprint.

Cipla, through Medpro, already has sizable revenue base in South Africa. In FY18, Cipla's revenue in South Africa grew by 17% yoy to US$320mn (14% of its FY18 revenue). In Q4FY18, Cipla's revenue in South Africa grew by 18% yoy to US$83mn.

Mirren, on FY18 base would form 3.8% of Cipla's South African revenue and just 0.5% of consolidated FY18 revenue hence the acquisition is not very sizable.

This transaction is subject to the approval by the Competition Commission of South Africa.

To know more about the company, you can access to Cipla's latest result analysis and Cipla stock analysis on our website.

To get more updates on share market, click here.