Godrej Industries, the flagship of the Rs-9200 crore Godrej group, plans to buy back its shares after the stock price of the company plummeted nearly 65 per cent since January. “I am definitely going to propose to shareholders and the board for a buyback of Godrej Industries,” Adi Godrej, chairman, Godrej Group told Hindustan Times. “This is a very apt time to go for one.”
Share buyback is an instrument, used by cash-rich companies to buy its own shares from the open market. Companies go for share buyback whenever they feel that their shares are priced low and when they have sufficient funds to execute the same.
“Companies normally exercise this option when they get shares at a cheaper rate,” said Apurva Shah, head, equity research, Prabhudas Leeladhar. A buyback also improves the EPS (earning per share) for the company. Godrej shares closed at Rs 146.60, up Rs 0.55 at the Bombay Stock Exchange on Monday.
Adi Godrej justified the move saying that it was the right tool to use when markets undervalue assets. The company is planning to move a resolution in the annual general meeting of its shareholders scheduled this month-end, Godrej said.
According to the current regulatory norms, Godrej will be able to buy back up to 10 per cent shares from the open market.