GNFC to buy back shares worth ₹653 crore in December

Gujarat Narmada Valley Fertilizers & Chemicals (GNFC) has unveiled plans for a share buyback, set to kick off on December 1 and conclude on December 7. The company intends to repurchase 84.78 lakh equity shares at a rate of ₹770 each, ensuring that the total amount does not exceed ₹652.81 crore. The buyback, representing 5.46% of GNFC's existing total paid-up equity capital, is set at a premium of 11.9% compared to the closing price on November 29. The record date for buyback was November 24.

GNFC aims to efficiently and cost-effectively give back extra funds to its shareholders through the buyback. As outlined in a regulatory filing, these funds go beyond the company's regular capital needs and current investment plans.

Gujarat State Fertilizers & Chemicals and Gujarat State Investments, the two promoters, currently hold 41.18% of the company. Following the buyback, their aggregate shareholding will increase marginally to 41.3%. Promoters have expressed their intention to actively participate in the buyback, intending to tender around 35 lakh shares.

Financial Highlight

During the second quarter of fiscal year 2024, Gujarat Narmada Valley reported a decline in key financial metrics compared to the same period last year. The company's revenue dropped 19.6%, amounting to ₹2,080 crore as opposed to ₹2,587 crore previously. Ebitda dropped by 45.3% to ₹169 crore from ₹309 crore YoY

The margin took a hit as well, contracting from 11.9% to 8.1%, reflecting a decline of 381 basis points. The net profit for Q2 FY24 stood at ₹182 crore, indicating a decrease of 23.5% compared to ₹238 crore in the corresponding period. These figures highlight a challenging quarter for Gujarat Narmada Valley. The decline in performance is linked to a scheduled yearly maintenance shutdown, leading to reduced production volumes.

Stock Performance

Over the past month, GNFC's shares have remained relatively stable, showing a marginal decrease of 0.84%. Looking at the past six months, the stock has been on an upward trend, delivering a 17% return. Investors who have been on board for a year have gained a 14% return on their investment. Taking a broader view over five years, GNFC has demonstrated impressive growth, delivering a 100% return to its investors.

Final Words

With the buyback, GNFC aims to deploy an effective capital management strategy, providing shareholders with an opportunity to benefit from the premium offered. The company's commitment to returning surplus funds in a well-organized manner reflects its dedication to maximizing shareholder value and maintaining financial prudence. Investors will keenly watch the developments as the buyback unfolds between December 1 and 7.