Shares of GAIL (India), the nation’s largest gas distribution firm, jumped nearly 6 percent on Friday after the corporate said its board will meet today to think about share buyback as also payment of interim dividend for the financial year ending March 2021. The GAIL stock price rose the maximum amount as 5.7 percent to its day’s high of Rs 143.50 per share.
The firm is probably going to think about buyback of shares with a view to returning surplus cash to shareholders, the most important being the govt of India.
A buyback, also referred to as a share repurchase, is when a corporation buys its own outstanding shares to scale back the amount of shares available within the open market.
The government has asked a minimum of eight state-run companies to think about share buybacks because it scours for tactics of raising funds to rein in its fiscal deficit. The firms asked to think about share buybacks include state-owned miner Coal India Ltd (CIL), power utility NTPC, and minerals producer NMDC.
The government, which holds 52.1 percent of GAIL, is probably going to participate within the GAIL buyback even as it did within the case of NTPC, Engineers India Ltd (EIL), RITES and KIOCL.
Kotak Securities, during a recent note, said that it expects GAIL to profit from an improvement within the outlook for—the gas marketing segment led by a recovery in spot and crude-linked LNG prices, petchem segment led by a strong rise in PE margins, LPG segment led by a recovery in prices and reduction in input gas cost and transmission segment led by growth in gas consumption. We prefer GAIL as a crude hedge over upstream PSUs and reiterate ‘buy’ with a revised fair value of Rs 140 (Rs 120 earlier).
In the September quarter, the corporate reported a net income of Rs 1,068.16 crore for the quarter ended September, down 8.5 percent from Rs 1,167.58 crore a year ago. Its revenue from operations dropped by 24.3 percent to Rs 13,809.86 crore, from Rs 18,249.90 crore a year before.