Mumbai, Jul 12 (IANS): Garment exporter KPR Mills on Friday became the first company to have withdrawn its buyback proposal due to the 20 per cent tax proposed in the Finance Bill 2019.

As a result, its scrips fell as much as 6.24 per cent before closing 2.29 per cent lower at Rs 594.05 a piece. The company had proposed a buyback offer of up to 37.50 lakh equity shares.

The buyback route allowed companies to avoid dividend distribution tax (DDT) until recently. But with buybacks by listed entities now being taxed at 20 per cent, the exercise has lost is advantage.

"We hereby inform you that we have today (Friday) filed with SEBI our communication conveying that 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," the company said in a BSE filing.

"We are not permitted to meet the buyback obligations beyond the amount approved by the Board of Directors and Shareholders of the Company and the same can also be effected only with the borrowed funds, which is prohibited by law. 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," KPR Mills added.