The management of Indian Rayon has approved a share buyback program under which it will buyback 25% of the existing equity capital. The proposed buyback will be done at a price ranging from Rs 70 to Rs 90. This is likely to ignite investor interest in the stock, which currently trades at Rs 74.55.
A buyback of share will have two consequences: a rise in earnings per share and also a reduction in the supply of shares in the market. Both these factors could contribute to a higher stock price for the company.
However, in what could raise an eyebro or two, the stock had witnessed a spurt of 35% in the week ended 14th August.
The company has undergone restructuring under which it sold off its cement division to Grasim, a group company. In return, shareholders of Indian Rayon were issued equity shares of Grasim Ltd. (in the ratio of 3 shares of Grasim for every 10 shares of Indian Rayon).
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