FMCG major Hindustan Unilever is considering buying back its shares from the market to utilise its surplus cash.
The company's board is meeting on June 11 to consider the proposal for buy back of shares, HUL said in its filing to the stock exchanges on Thursday.
"The company is rich in cash and it has surplus money for investment. If its board approves the buy back plan, it will be a rewarding thing for its shareholders," Bonanza Portfolio AVP(Research-Equity) Avinash Gupta said.
Bouyed by the news, HUL shares that had surged over 4 per cent yesterday, gained another 4 per cent in value before falling to 2.35 per cent by the afternoon on Friday.
"Over a long-period, the stock had been under-performing with the key benchmark indices", Gupta said adding the buy back offer would boost the liquidity of the scrip. "The buy back offer would help the promoters of the firm to increase their stake in the company", he said.
According to March quarter shareholding pattern data available in National Stock Exchange promoters at present hold a 52 per cent stake in HUL. Last time, the company did the buy back of shares was in July 2007.
The FMCG major is driven by a good show in the personal products segment and has reported a 47 per cent climb in its profit at Rs 581.20 crore (Rs 5.81 billion) for the quarter ended March 31, 2010. Net sales of the firm for the quarter stood at Rs 4,315.7 crore (Rs 43.16 billion), compared to Rs 3,988.33 crore (39.88 billion) of a year ago.
It has also declared a final dividend of Rs 3.50 per share for the fiscal March, 2010.
