Godawari Power & Ispat buyback: What shareholders must know?

Godawari Power and Ispat Ltd has announced a buyback of shares at a price of Rs. 500 per share. That is higher than the 52-week high price of the stock. Here is a quick snapshot of the Godawari Power and Ispat Ltd.

Godawari Power and Ispat Ltd (GPIL) belongs to the HIRA Group of Industries based out of Raipur in Chhattisgarh. Its business lines include an integrated steel plant with captive power generation. Godawari Power and Ispat Ltd has a dominant presence in the long-product segment of the steel industry and is primarily engaged in the mild steel wire segment. It is actually an end-to-end manufacturer of mild steel wires.

Godawari Power and Ispat Buyback Offer

Captured in the table below are some of the highlights of the buyback offer.

Offer window will not be available on 14th April due to Ambedkar Jayanthi.

How buybacks add value to shareholders

Here are some of the ways in which buybacks add value for shareholders.

1. The Buyback actually helps the company to return surplus cash to its shareholders holding Equity Shares broadly in proportion to their shareholding. This is a way of rewarding the shareholders and increasing their stake in the company without any additional investment from their side.
    

2. From the company perspective, the buyback reduces the outstanding shares and also the floating stock. This is normally positive for the stock even assuming that the P/E ratio for the stock remains constant. In addition, the buyback also helps the company to optimize its capital structure.
    

3. It is choice given to shareholders. The Buyback gives 2 options to shareholders holding Equity Shares of the Company. Shareholders can either choose to participate in the buyback and get cash in lieu of Equity Shares. Alternatively, they can also choose not to participate and enjoy a resultant increase in their percentage shareholding, post the Buyback offer. The shareholders can make a conscious choice here.