Gail India gains 4% as board to consider share buyback on Thursday

The attractiveness of the buyback will be determined when the quantum and price of buyback is announced, said ICICI Securities in a note.

Shares of Gail India jumped 4 per cent to Rs 153.25 on the BSE in Monday’s intra-day trade after the state-owned utilities company announced that its board will consider buyback of shares in its board meeting on Thursday, March 31, 2022.

“The meeting of board of directors of the company will be held on Thursday, 31st March, 2022, to inter alia consider buy back of the fully paid-up equity shares of the Company,” Gail India said on Friday, March 25, after market hours.

The stock quoted higher for the fourth straight trading day, and gained 7 per cent during the same period. At 02:06 pm; it was up 3 per cent at Rs 152.40, as against a 0.1 per cent rise on the S&P BSE Sensex. The trading volume at the counter more-than-doubled with a combined 21.3 million equity shares changing hands on the NSE and BSE.

The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings (P/E) multiple.

As on December 31, 2021, the government of India held 51.8 per cent stake in Gail India. Foreign portfolio investors (FPIs) 19.69 per cent holdings, while mutual funds 7.92 per cent stake in the company, the shareholding pattern data shows. Besides, Indian Oil Corporation and Oil and Natural Gas Corporation (ONGC) hold 2.47 per cent and 4.94 per cent stake, respectively. Retail shareholders held 4.37 per cent holding, data shows.

In the past three months, Gail India has outperformed the market by surging 15 per cent, as compared to 1 per cent decline on the S&P BSE Sensex. The stock hit a 52-week high of Rs 171.35 on October 6, 2021.

Buyback of shares will reward minority shareholders. The attractiveness of the buyback will be determined when the quantum and price of buyback is announced, ICICI Securities said in a note.