Calcutta, July 18: ICI Ltd is planning to buy back shares to raise UK parent Imperial Chemical Industries (ICI) Plc’s stake in the Indian subsidiary.

The ICI India board will meet on July 25 to buy back at a price not exceeding Rs 350 a share.

It will utilise up to 25 per cent of the paid-up capital and free reserves ? the maximum a company is allowed in a fiscal ? to fund the programme.

The company will thus have Rs 125 crore in its kitty, allowing it to buy back a maximum of 10 per cent of the present equity if the price is Rs 300 a share.

If shares are tendered at Rs 350, the company can buy back a maximum of 8 per cent.

Since ICI Plc will not sell its shares, its holding will go up from 50.83 per cent to 55 or 56 per cent, depending on the price and if fully accepted.

ICI executive director M.R. Rajaram said the decision was to reward the minority shareholder.

“We could have doled out a large dividend. In that case, ICI Plc would have been benefited the most,” he said. The stock closed at Rs 308.25 today.

Public shareholding in ICI stood at 10.56 per cent on March 31, 2006. Domestic and foreign institutional investors hold 27.57 per cent in the company. UTI, one of the bigger investors in ICI, said it would not tender shares at the buyback.

Asian Paints, which bought the government’s 9.2 per cent holding in ICI at Rs 205 a share in 2003, is also unlikely to sell.

Therefore, the success of the buyback will largely depend on public participation.

ICI India had Rs 200 crore surplus cash in 2005-06. It has already invested about Rs 55 crore to acquire 49 per cent interest in Quest India from its JV partner Hindustan Lever Limited, taking its shareholding in Quest India to 99 per cent.

Another Rs 3-4 crore will be invested to convert Quest India into a 100 per cent subsidiary prior to its merger with ICI India.

The proposed buyback will utilise about Rs 125 crore and the balance surplus of Rs 20 crore will be spent on increasing capacities.