Shares of NIIT Technologies advanced 6 per cent to Rs 1,563 on the BSE on Tuesday after the company announced that its board will meet on December 23 to consider share buyback proposal. The stock of the IT consulting & services firm was trading close to its 52-week high level of Rs 1,638 touched on November 21, 2019.
In the past one-and-half years, big technology companies such as Infosys, Tata Consultancy Services (TCS), Wipro and HCL Technologies have preferred the buyback route to meet two purposes -- rewarding shareholders, and utilising free cash available.
NIIT Technologies is a debt-free (no long term borrowings) company, with cash and cash equivalents increased from Rs 806 crore a year ago to Rs 976 crore as on March 31, 2019. The company’s net worth stood at Rs 2,072 crore at the end of financial year 2018-19.
The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings (P/E) multiple.
In the past six weeks, NIIT Technologies has underperformed the market by falling 8 per cent. In comparison, the S&P BSE Sensex was up 1.6 per cent, while the sector index S&P BSE IT index down 1.6 per cent during the same period till yesterday.
At 11:41 am, the stock was trading 5.6 per cent higher at Rs 1,556 on the BSE, as against a 0.63 per cent rise in the benchmark index. The trading volumes on the counter nearly doubled with a combined 1.09 million equity shares changing hands on the NSE and BSE so far.