Even as stocks languish companies are trying to create value for shareholders through bonus and buyback of shares. Here are 2 stocks where the company boards are slated to meet later to declared bonus and buyback of shares.
Motilal Oswal Financial Services
The Board of Directors of the company will meet on May 17 for buyback of shares. Probably, the company is seeing value in the stock at lower prices and hence has offered a buyback of shares. The stock of Motilal Oswal is quoting at Rs 807 and it would be interesting to see at what rate the buyback of shares is offered. Anywhere in the 900 and Rs 1000 range would make the share buyback attractive. Also, the size and quantum of the buyback would need to be watched. The shares of Motilal Oswal like the markets in general have fallen from levels of Rs 1188 to the current levels of Rs 887. The company has performed reasonably well over the years and the quarterly numbers of the last few years are just fantastic. Having said that, some companies that have announced buyback of shares have seen their shares languishing even after the buyback, a classic example is Gulf Oil Lubricants.
The board of Nazara Technologies is scheduled to meet on May 17 to declare a bonus issue of shares. Again, the movement in the stock would depend on the bonus issue. A bonus like 1:1 would be cheered by investors. The company about a year back had come up with an IPO that was priced at Rs 1100 range. The stock is now trading at Rs 1250.
Nazara Technologies is a mobile game company in India. The company offers a range of diversified gaming products across the Interactive gaming, eSports, and gamified early learning ecosystem across emerging markets i.e. India, Africa, South East Asia, Middle East, and Latin America. We would recommend investors to stay away from the stock as the shares are over priced.
Should you buy the shares of these companies where bonus and buyback are lined-up?
It really depends on the company. On the above two mentioned, we would definitely prefer a buy on Motilal Oswal, which has a long-standing track record. Companies like Nazara have to still prove them selves with a long-standing track record of profitability. The lure of bonus can sometimes backfire. Stocks from the space, particularly the digital space are being hammered down by investors. Though we cannot strictly compare the company to the likes of Zomato, Nykaa or Policy Bazaar, what we are seeing in new age digital companies is that their stocks are taking a pounding.
The problem right now for stocks in general is that if promises do not match performance, investors are just dumping the stock. Given the way the markets are, we do not recommend buying shares, just because there is a buyback of shares or bonus issue. With interest rates in the economy headed higher, investors are willing to now see an opportunity in fixed deposits and would dump stocks, if there is no performance to boast of.