The share buy-back costing a maximum of nearly Rs. 2.3 billion (Rs. 2.295 bn.) announced by John Keells Holdings PLC last week at a time its share price is depressed was stated by the company as a means of using part of the substantial funds available to it to infuse greater value to the remaining shares.

``At a time that our share price is depressed, it is an opportunity to infuse some value to the remaining shares and also afford some comfort to those of our shareholders who may need the cash for various reasons,’’ explained a company spokesman.

While analysts noted that the Rs. 90 buy-back price was a premium over the Rs. 86 level at which the share closed on Friday, many shareholders who last year paid Rs. 140 to take up their entitlement on a rights issue floated by JKH felt that the premium was far too small.

``True, the rights were sweetened by a bonus and the eventual cost after that was Rs. 122 a share,’’ one shareholder said. ``But even considering the current depressed market, there’s a big gap between that at the Rs. 90 price offered.’’

Shareholders, however, were happy about the 10% interim dividend announced along with the buy-back noting that although no dates for the payment has yet been announced, it seems that this dividend is likely to be paid earlier than usual.

Asked why only a very small number of shares (one for 25 or 4% of the shares issued) were covered by the buy-back offer, JKH sources explained: ``Given the cash we have available, and the need to reserve some resources for other investment, this was about what we could manage.’’

He also explained that shareholders may apply to sell more than their entitlement under the offer ``rather like a reverse of a rights issue where you can apply for additional shares above your entitlement and be allotted shares others may not have taken up.’’

He expected that some shareholders will not exercise their option and shares they did not surrender will be available for allotment to others who may want to sell more than their one for 25 entitlement.

The company announcement said that ``directors of JKH who are shareholders will not be accepting this offer.’’ Most JKH executive directors are substantial shareholders of the company with holdings running into several million shares.

Some foreign funds who are big shareholders and local high net worth investors with big holdings may not accept the buy-back offer, analysts said.

The JKH source said that share buy-backs, new to this country as they have been permitted only under the new company law that came into effect recently, are used in many other countries where companies take advantage of prices of their shares being depressed to buy-back for value infusion.

Given that the JKH share is now trading at below the offer price, would it be advantageous for a shareholder to buy JKH now at Rs. 86 (plus transaction cost) and surrender the same number of shares he already holds on the one for 25 limit at Rs. 90 and take a small profit?