Calcutta, Aug. 30: Naveen Jindal-promoted Jindal Steel & Power Ltd today said it would buy back shares totalling Rs 1,000 crore to support the company’s stock price.
The company plans to buy shares from the open market at a price not exceeding Rs 261. The JSPL stock tanked 8.85 per cent, or Rs 21.55, to close at Rs 221.90 on the BSE.
News of the Centre probing the firm on coal allocation pulled down shares on a day the benchmark Sensex rose 1.19 per cent. The stock was the worst performer among the blue-chips on both the key indices — Sensex and Nifty.
The buyback is likely to be launched in the next fortnight and continue till March next year, K. Rajagopal, the newly appointed wholetime director of JSPL, said.
“When we decided to launch the buyback programme, the stock was quoting at Rs 187. It was grossly undervalued. So, we wanted to send out a strong message to the investor community with this offer,” Rajagopal said.
JSPL’s market capitalisation is around Rs 20,000 crore, and the buyback will cover around 5 per cent of the equity base.
The holding of the promoter group is expected to rise to 1-1.5 per cent after the completion of the plan. At present, Naveen Jindal and family owns around 59.13 per cent in the steel and power producer, while institutional investors have a 27.50 per cent stake. The rest were being held by the general public.
The buyback programme comes at a time the stock is down 37 per cent year to date, hit by fears of the impact of the economic slowdown on the steel industry and the CBI probe in the alleged coal scam.
Companies use buyback to improve their share price valuations, though it reduces the free float shares in the open market.
Rajagopal, group CFO of JSPL, has been appointed wholetime director, just days after deputy managing director Sushil Maroo quit.
Maroo had been with JSPL for more than a decade, and he joins Essar Energy as its CEO in the place of Naresh Nayyar.