Share price of JustDial climbed 6.45% after the company said that the Board of Directors approved the proposal for buyback of fully paid-up equity shares in a meeting held on April 30, 2020.
The Board approved the proposal to buyback 31,42,857 equity shares at a maximum price of Rs 700 aggregating to Rs 220 crore via a ‘tender offer’, rather than via open market purchases.
The proposed buyback will result in acquiring 4.84% of the total paid-up equity capital of the company.
JustDial provides local search-related services to users in India through multiple platforms such as Desktop/PC website, mobile site, mobile apps, over the telephone and text.
It may be remembered that a stock buyback is one of the two key ways to give excess cash generated by a company back to shareholders, with the other being to issue a dividend.
Such moves are also resorted to frequently when the management feels that the company’s stock is undervalued, and wants to take advantage of the low share price to bring down the equity base. It is also sometimes resorted to before a company sells shares to a strategic investor to prevent over-dilution of the share capital.
JustDial is soon expected to report a full-year profit of around Rs 250 crore on revenue of around Rs 1,100 cr for the ongoing financial year.
This would imply a per-share profit (EPS) of around Rs 40, while the current price of the stock is only around Rs 400, indicating a profit yield of around 10% or a PE of 10x.
The company, meanwhile, is zero debt and is cash-rich, with liquid cash/investments of over 1400 crs as on Sept 2019
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