Smallcap Stock Soars 11% After Board Announces Share Buyback Record Date

Godawari Power & Ispat Limited Sees 11% Surge as Board Considers Share Buyback

Godawari Power & Ispat Limited (GPIL), a power stock involved in mining iron ore and manufacturing iron ore pellets, sponge iron, and electricity generation, surged 11% in today’s trade. This rise followed the company’s announcement that its Board of Directors will consider a share buyback.

With a market capitalization of Rs. 14,270 crores, GPIL shares traded at Rs. 1,050 per equity, marking a 7.49% increase from the previous close of Rs. 974.90.

Is Godawari Power a Buy or Sell?

The Board of Directors of GPIL has scheduled a meeting on June 15, 2024, to discuss the buyback proposal for fully paid-up equity shares with a face value of Rs. 5. Last year, the company executed a share buyback for up to Rs. 250 crores via the tender offer route, purchasing 50 lakh equity shares at Rs. 500 each, which constituted 3.66% of the total equity shares.

GPIL engages in mining iron ore and manufacturing iron ore pellets, sponge iron, steel billets, wire rods, H.B. wire, and ferro alloys. The company also generates electricity and operates captive iron ore mines and manufacturing plants in Chhattisgarh.

GPIL has a robust growth plan to more than double its capacities in iron ore mining, pellets, and integrated steel production to 6.7 million tons, 5.7 million tons, and 2.5 million tons, respectively. In FY24, the capacities of sponge iron and steel billets increased to 0.594 million tons and 0.525 million tons, respectively.

Despite a decrease in iron ore mining and pellet production, GPIL has improved its operating margin through higher production volumes of value-added products, low-cost solar energy, and operational efficiency.

Revenue from operations grew by 16.19%, rising from Rs. 1,316.59 crores in Q4FY23 to Rs. 1,529.81 crores in Q4FY24. Profits increased from Rs. 169.54 crores to Rs. 218.85 crores.

In terms of return ratios, GPIL reported a return on equity (ROE) of 22.3% and a return on capital employed (ROCE) of 29.7%. The company maintains a debt-to-equity ratio of 0.01.

Summary

Godawari Power & Ispat Limited remains a strong contender in the stock market, backed by a solid growth plan, improved operating margins, and favorable return ratios. The upcoming board meeting to consider the share buyback could further bolster investor confidence and sustain the stock’s upward momentum.