Nucleus Software To Consider Buyback Plan: All You Need To Know

Nucleus Software Exports Ltd. is up 20% in trade today and hits upper circuit, after the management announced that buyback of shares will be considered in a meeting to be held on Aug. 22.

This is the third buyback of the company, following the buybacks which happened in 2017 and 2021.

In the year 2021, the company had bought back over 22.67 lakh equity shares at a price of Rs 700 apiece. The stock has since then run more than 100% and is currently at Rs 1,411.

How Much Can Nucleus Software Buyback? 

According to the Companies Act, 2013, a company can buyback up to 10% of the total paid-up equity share capital and free reserves without taking shareholders' approval. The total paid-up equity share capital and free reserves for Nucleus Software is at Rs 777 crore as of March 31, 2024. Therefore, the company can buy back up to Rs 77 crore of shares without seeking shareholders' approval. The company currently has a cash balance of Rs 74 crore as on March 31, 2024.

However, if the company gets shareholders' approval, a total of up to 25% of the total paid-up equity capital and free reserves can be bought back. This amounts to Rs 194 crore.

A buyback of more than 25% of the paid-up equity share capital is not allowed.

What Share Of Market Cap Can Be Bought Back?

Considering only board approval is taken, Nucleus Software can buy back up to Rs 77 crore worth of shares from shareholders, which amounts to 2% of the current market capitalisation.

Stock Performance 

The stock is up 22% in last seven days, largely accounts to today's movement. Looking at the last 3 and 6 months, the stock is up 3.5% and up 9.5% respectively.

Buyback Tax 

The latest Budget introduced provisions mandating that investors will have to pay the buyback tax starting Oct. 1. Earlier this expense was borne by companies.

In this case of Nucleus's buyback, since the announcement will come before the aforementioned cut off date, the company will have to pay the tax.

The buyback tax rate is a flat 20% charge, plus a surcharge of 12% and health and Education cess of 4%. So the effective tax rate comes to around 23.3% for buybacks.

Recent financial performance

Nucleus Software reported a weak set of numbers for the quarter ended June. Revenue dropped 7% sequentially to Rs 195.39 crore during the quarter under review, while net profit fell 42% to Rs 30.2 crore. Operating profit, or EBIT was down 54% to Rs 25.06 crore, while margins contracted 1,306 basis points to 12.82%.