The stock of gas transmission major, GAIL, surged over 5% in the past week as on April 1, 2022, post the announcement of its share buyback. The company looks to reward its shareholders given its healthy balance sheet. Many analysts expect the buyback to provide around 10-20% returns to the shareholders. Since January this year, the stock has rallied 22%, as opposed to a +/- 1% movement in the benchmark indices during the same time frame.
GAIL (India) approved a buyback of around 5.7 crore shares on March 31, 2022. The total buyback value will come up to Rs 1,083 crore. This represents at least 2.5% of the company’s paid-up capital and free reserves as of March 31, 2021. The buyback price has been set at Rs 190 per share.
The record date for the buyback has been set as April 22, 2022.
The GAIL buyback price is at a 24% premium to the closing price on March 31, 2022. The buyback price is 11% higher than its 52-week high of Rs 171.3 per share.
As of April 1, 2022, the stock’s PE ratio was at 11.44 while the industry PE is around 14.35.
The company mentioned that the buyback would help in optimizing the capital structure and improving return on equity, by a reduction in the equity base, thereby leading to a long-term increase in shareholders‟ value.
Gas Authority of India (GAIL), is one of the leading players in natural gas in India. It has diversified operations including sourcing, transportation, distribution and processing of natural gas in India along with LPG production and transmission, petrochemicals and LNG re-gasification.
The company has a gas pipeline network of around 13,700 KM in India and it has further expansion plans of 6000 KM in the coming years. About 70% of natural gas transported in India is through GAIL’s pipeline.
Learn more about Buyback here – What is share buyback
GAIL is not only present in all the cities in India but also has an international presence across countries including the US, Singapore, Myanmar, Russia, Egypt and China.
GAIL has been rewarding its shareholders through regular dividends. And the debt-equity ratio of the company had been stable at 0.2 times. And the company has sufficient cash reserves to cover its debt too. In the recent December quarter, the company reported revenue growth of 67% y-o-y with revenue increase across all its segment. It also reported a profit growth of 121% y-o-y during the same period.
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Research Analyst: Bavadharini KS