Godawari Power To Consider Share Buyback, Stock Surges To Record High

Godavari Power & Ispat Limited (GPIL), is a public enterprise, incorporated in 1999. Currently, it holds a dominant presence in the long-product segment of the Steel Industry, mainly in mild steel wire. GPIL has been awarded the rights for Iron Ore and Coal Mining which has led it to become a fully integrated manufacturer. The company has shown strong growth and potential by registering a 175% increase in its stock price in the past year.

What’s a buyback?

Buyback or share repurchase is a corporate action taken by the company to buy back its shares from the current shareholders. The rate at which the shares are bought back is usually higher than the current market price. For example: the current market price of Godavari Power is at Rs.1,046.25/ per share, as of June 10, 2024. However, on the day at which the company will decide to set the price for the Buyback, they will ensure that the price is above the CMP. Buyback of shares occurs in 2 forms: tender offer (buyback happens at the offer price) and open market offer (buyback happens on an exchange platform).

Exchange Filing:

GPIL announces, in the filing, that a Board of Directors meeting will be held on 15 June. The announcement also cites the Companies Act, 2013, and the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018. By mentioning such regulations and informing the exchange platforms prior to the meeting, the buyback indicates that an offer price will be issued. The filing also informs the concerned shareholders that the trading window will be closed for dealings in securities of the Company from June 08, 2024.

History of Buybacks:

GPIL had carried out a buyback last year by purchasing shares worth Rs. 250 Cr, via the route of tender offer. The buyback price or the offer price was fixed at Rs. 500/ share. The board, then, had agreed to buy back 50 Lakh equity shares accounting for 3.66% of the total equity shares. Even today, with the announcement of plans of buyback, the shares of GPIL jumped by approx. 7.2% to a record high of Rs. 1046.25.

Conclusion: 

GPIL is currently indicating a positive trend in its stock price. The company’s strong financial growth, increase in its share price, and confidence in conducting a second buy-back in just 1 year, makes it a promising investment option for investors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.