Apparel manufacturing firm KPR Mills has decided to withdraw its proposed share buyback plan due to the new tax proposal on buyback obligations in the Finance Bill 2019, the company said on Thursday. The stock fell as much as 6.2 percent to Rs 571.30 intraday on Friday on the news.

The company, in June, had proposed to buy back up to 37,50,784 shares at a price of Rs 702 per share for an aggregate amount of Rs 263.3 crore, according to a draft offer letter filed with the BSE on June 17. The record date for the buyback was June 17.

The government, in the Union Budget 2019, which was presented by finance minister Nirmala Sitharaman, had proposed to levy a buyback tax of 20 percent on listed companies.

"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," KPR Mills said in a July 11 regulatory filing.

KPR Mills said that it is not allowed to meet the buyback obligations beyond the amount approved by the company's board and shareholders. The buyback obligations would be effected "only with the borrowed funds, which is prohibited by law," added the company.

"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," said KPR Mills.

First Published:Jul 12, 2019 11:20 AM IST