I am not sure about the objective of the Buyback announced by the Management few days back. The
At the buyback price of 270 for 52.26 Lakhs shares, the outflow is Rs. 141 Crores.
I could think of the following reasons for the management to go in for the buy back:
The Management thinks that the share is undervalued in the market, and would like to bring up the market price to a fair value. (or)
The promoters need funds for meeting some personal commitments / investments. (or)
The company does not need any additional funds for expansion. Hence, by returning the idle funds to the share holders, RoE can be improved. (or)
The Promoters intend to participate in the buyback as well implies they want to take out the cash from the company. I believe the risks mentioned in my previous post seems to be realizing since management themselves don’t feel the room to expand or increase operational efficiencies.
Discl. Tracking position
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