With the buyback, the promoter holding in Hindustan Zinc is set to rise allowing greater control over the board, and make it possible for Agarwal to bring all group businesses under one company -Vedanta.
The stock may correct a little more because of the recent developments; but analysts believe that from a purely fundamental point of view, this shouldn't matter too much.
The company has recently increased its product prices.With recent capacity addition, it is likely to exceed Rs 1,000-crore sales in FY17.
Though the stock has gained 80% in the past six months, its current valuation continues to look attractive considering the growth prospects.
The strategy helped the company record Rs 28,136 of sales per square foot compared with an estimated Rs 9,000 for Trent and Rs 5,300 in case of Future Retail.
The company’s stock has more than doubled in the last six months, after the sharp rise in TDI and could see further investor interest with the recent development.
With this and open market purchases in July and August, promoter holding in the company will increase by around half a percent in the September quarter.
With improving earnings and margins, the gap should narrow down. There are several triggers that will allow the company to sustain over 2530% compounded profit growth for the next three years.
Reasons for the robust growth include customers shifting to branded space, schemes aimed at drawing more footfalls and rise in the gold prices.
This development, however, is a positive for rivals such as West Coast Paper Mills, Tamil Nadu Newsprint & Papers, Orient Paper Products, JK Paper and Ruchira Papers.
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