Monnet Ispat Ltd said that it was considering a buyback of its shares. In a filing to the BSE, Monnet said that “Its board of directors will meet on December 22 to consider the proposal of buyback of its own shares...”

An analyst said that the buyback proposal could have been prompted by the promoters' belief that the company scrip is undervalued and this is the right time to reduce equity base. Since Monnet is in a CAPEX mode, they could leverage their balance sheet to fund the buyback.

In May, Monnet officials had disclosed the company's plans to incur a capital expenditure of INR 1,200 crore towards steel business and another INR 1,500 crore towards expanding its power plant capacity during the current financial year.

Monnet is expanding its steel capacity with a 1.5 million tonnes integrated steel plant at Raigarh. The company expects to roll out various project modules of this project over the next few quarters. It is also executing a 1,050 MW power plant at Angul in Orissa.

Industry analysts said that the steel industry has been going through a rough time due to high debt levels, say. The expansion plans of the steel companies have been put on hold due to the decrease in demand.

However, Crisil in a research report on the company released on December 13 said that “The company's expansion plan and move to backward integrate its steel business through coking coal and iron ore mines along with its power venture are expected to significantly increase profitability.”

(Sourced from BL)